South Africa’s JSE All-Share index is up by around 40% from its autumn low, and the rand has strengthened by around 13% against the dollar in the past half year. This is partly due to the rebound in global risk appetite that has bolstered commodity-heavy indices, such as South Africa’s. The country also appears to be emerging slowly from its first recession since the early 1990s. But there is another reason for cheer.
When President Jacob Zuma was elected in April, many feared the worst. He was installed as head of the ruling ANC party by Communist and trade union allies. This raised the spectre of a dash for growth through heavy spending programmes and interest-rate cuts that would lead to inflation, blow the budget and spook international investors. Union talk of a “working-class hegemony” and nationalising the mines didn’t help.
But the leftward shift hasn’t happened. The former finance minister and central bank governor have been moved, but judging by their successors (who are former colleagues), the overall emphasis on fiscal caution and inflation-targeting endures, says Nasreen Seria on Bloomberg.com. The unions in the cabinet have little say over monetary and fiscal policy. “Nothing has changed,” says Steven Friedman of the Centre for the Study of Democracy. “Zuma appears to be making very solid decisions,” agrees Joseph Rohm, manager of the Africa & Middle East fund at T Rowe Price. “We are encouraged that what was a business-friendly environment has been maintained.”
But can Zuma stay the course? Conflict with the unions looks inevitable. Strikes have come “thick and fast” this wage-bargaining season, as South Africa’s Financial Mail points out, and the government is having to balance a long list of spending demands with shrinking state revenue. The only certainty for now is that Zuma’s “fabled skills as a conciliator”, as The Economist puts it, will be tested to the limit.