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September / October 2007 in South Africa
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September / October 2007 at a Glance
[Monthly Article Archive]
Stirring times, indeed. The tremors that rippled through South Africa during the third and into the fourth quarter this year were political, not economic. Powerful as they undoubtedly were, there was no immediate evidence that they were rattling an economy that continues to show resilience as the build-up to World Cup 2010 grows apace.
At the heart of the political malaise is the succession battle in the African National Congress. This is rocking the ruling party to its core. In December this year it is due to elect a new party president. The two main candidates are the current President of South Africa, Thabo Mbeki, and his bitter rival Jacob Zuma, current darling of the working classes. At least one self-made multimillionaire, Tokyo Sexwale, has also announced his candidature. Others may be waiting in the wings. But it is the antics of the main contenders that are making all the waves.
In ordinary circumstances the leader of the ANC would become the leader of the country when President Mbeki's second and last term is completed in 2009. Thus Zuma would automatically become South Africa's President if he wins the party election. On the other hand, Mbeki is constitutionally barred from serving a third term but has made it clear that he wishes to be party leader and thus the power behind the throne. So the battle-royal has commenced, very publicly. It is this ruthless battle for political ascendancy that provides a context for otherwise inexplicable dramas now enthralling the country.
In late September, Mbeki dramatically announced that he was suspending the head of the National Prosecuting Authority (NPA), ostensibly because of an irretrievable breakdown in relations between the latter and the Minister of Justice. It quickly emerged however that there was more to it than that. The head of the NPA, Vusi Pikoli, had recently obtained a warrant of arrest on corruption charges against South Africa's Commissioner of Police, Jackie Selebi, who also happens to be head of Interpol. The belief is growing that Mbeki was intent on preventing the warrant being executed because Selebi is a loyal and influential Mbeki supporter. Observers and opposition politicians accuse the President of "protecting" Selebi.
The makings of a constitutional crisis exist because of the executive's intrusion into the judicial process. It may be papered over, but it is much more likely that the fight for leadership of the ANC will become more heated, not less, before the party elections in December.
Meanwhile, South Africa's equity markets have bounced back after the global hiccup that was created by the US subprime crisis in early August. Expectations remain high that the national economy will continue to be stimulated as the World Cup draws closer, despite occasional hiccups. Fifa, the world soccer body, has time and again reconfirmed its faith that South Africa can handle the event, which is already generating vast infrastructural spending.
The Reserve Bank's September Quarterly Bulletin indicated that growth in
gross domestic expenditure (gde) eased noticeably to an annualised 1,1% quarter on quarter, and 8,7% in 2006 as a whole. A decline in growth of consumer spending, particularly in durable goods, was mainly due to three factors: the effect of higher interest rates; the introduction of the National Credit Act in June; and higher car prices. Government spending also contracted in the second quarter, partly because of a public-service strike.
The Business Confidence Index fell by 8 points to 72 in the third quarter of 2007, its lowest level in three and a half years, but remains well above the critical level indicating continued optimism.
On October 11 the Reserve Bank's monetary policy committee increased the official repo rate by 50 basis points to 10.5% - a clear signal that the Bank gives greater weight to keeping inflation in check than it does to stimulating the economy - at least in the short term. Indicators confirm that the rate of spending in the country fell after earlier hikes. Inflation, measured by CPIX, has breached the 6% ceiling every month since April.
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