President Jacob Zuma. Picture: GCIS
President Jacob Zuma. Picture: GCIS

THE African National Congress’s (ANC’s) "pushmi-pullyu" approach to governance has reached farcical proportions: opposing factions in the ruling party, and even Cabinet ministers, routinely pull in different directions. But now the party’s members in the legislature are actively contradicting the executive on matters of policy.

Last week saw an extraordinary about-turn by ANC members of Parliament’s labour committee on proposed amendments to the Labour Relations Act that had already been through the National Economic Development and Labour Council and the Cabinet, while far-reaching amendments to South Africa’s mining rights regime were promulgated even as another, contradictory, amendment bill was introduced to Parliament.

This on top of the confusion that often reigns in the Cabinet over the direction and ideology of economic policy, with ministers sympathetic to the ANC’s left-leaning alliance partners often disagreeing with more pragmatic colleagues over matters such as industrial policy. Even the National Development Plan, a blueprint for long-term economic growth that has been endorsed by the ruling party, the Cabinet and business, receives less-than-enthusiastic support from some in the party and alliance.

Business leaders have had enough — and they are apparently not alone. Foreign investors are starting to vote with their feet, as the bond market sell-off and sharp depreciation of the rand so clearly illustrate. And on Thursday, Reserve Bank governor Gill Marcus, an ANC stalwart who is normally diplomatic to a fault, delivered her strongest warning yet that "decisive leadership" was needed to tackle South Africa’s domestic challenges, which had reached "crisis proportions".

Her appeal was simple, and little different to what business leaders and economists have been repeating for much of President Jacob Zuma’s tenure in charge of the ruling party and government: South Africa needs a coordinated range of policy responses to the varied domestic and international challenges that confront the economy. These are largely beyond the scope of monetary and macroprudential adjustments, areas where the Bank could intervene. And, most pertinently: "Much more important than the precise elements of a strategy is for the government to be decisive, act coherently, and exhibit strong and focused leadership from the top.… This will go a long way to restoring confidence, credibility and trust."

Amen to that.

There is only so much latitude the Bank can be expected to show in the face of avoidable inflationary pressures before it will be forced to raise interest rates. It has already allowed inflation temporarily to exceed the upper end of its target range rather than risk sacrificing economic growth for price stability, but this is only possible to a point.

Administered prices, labour costs relative to productivity, and the price of electricity are all directly affected by the quality of a country’s governance, and South Africa is falling behind its emerging market peers in all three areas.

The exchange rate is the real deal-breaker here — while the rand’s depreciation has so far not translated into out-of-control inflation due to weak consumer demand, sustained currency weakness combined with continued labour market volatility and lacklustre productivity numbers will cause prices to rise and force the Bank to respond using the only tools available to it.

Mr Zuma’s attempt to restore confidence in the economy a little over a week ago fell flat because the situation has gone beyond the point where mere platitudes and weak appeals for everyone to pull together will have any effect. There is no longer any substitute for the bold leadership and decisive action Ms Marcus is calling for.

The appointment of Deputy President Kgalema Motlanthe and Finance Minister Pravin Gordhan to mediate between trade unions and companies in the strike-hit mining sector has much to recommend it but is insufficient in itself. Investors want to see results — in this case, a return to responsible demands, negotiated wage settlements and peaceful dispute settlement mechanisms — not the promise of better days ahead.

Economists quoted in the most recent edition of the Financial Mail warned of South Africa reaching a tipping point in the absence of a co-ordinated policy response from the government, with a real danger of the rand’s slide turning into a full-blown rout. Independent economist Colen Garrow pointed out that politics tends to lead the economy, and "nothing is more sobering than the markets telling the politicians that they got it wrong; the rand’s doing that now".

South Africa has deep, structural economic fault lines — many, but not all, legacies of apartheid — that must be addressed honestly rather than reverting to ideological squabbles that should have disappeared with the Berlin Wall. It would obviously have been preferable for this to have occurred when neither the domestic nor the international economies were on the brink of crisis, but the second prize is to start the conversation before South Africa reaches the tipping point mentioned earlier.

All it might take is another sovereign credit rating downgrade, a Marikana-type confrontation with police, or even an external trigger such as another hiccup in Europe, and the rand could fall out of bed like it did in 2001, prompting interest rate hikes, economic stagnation and recession. With an election on the horizon next year, that would be a recipe for political turmoil such as South Africa hoped never to see again after the early 1990s.