South Africa

Politics:

• Analysis

  South Africa politics: Quick View - Cyril Ramaphosa will serve as a de fact

  Event

  Cyril Ramaphosa, the newly elected deputy president of the African National Congress (ANC), will play a central role in government, acting as a de facto prime minister, according to Gwede Mantashe, the party's secretary-general.

  Analysis

  Although Mr Ramaphosa is now the second most powerful figure in the party hierarchy, after the president, Jacob Zuma, he is not, in theory, scheduled to become the national deputy president until after the 2014 elections (assuming the ANC is victorious). However, it now seems likely that the ANC will deploy him in government in the interim, as a de facto prime minister, with responsibility for monitoring and co-ordinating the work of other ministers. The precise mechanism to bring this about remains uncertain, although there are two possible scenarios.

  First, Kgalema Motlanthe, the current national deputy president, could be recalled or choose to resign, thereby paving the way for Mr Ramaphosa's immediate promotion. Mr Motlanthe's intentions are unclear, but having failed to dislodge Mr Zuma from the party leadership, and having declined to contest any other elected position (including membership of the National Executive Committee), he now finds himself isolated from key decision-making organs. Although a recall seems unlikely, in the interests of broader party unity, a resignation would not be surprising. Alternatively, Mr Ramaphosa could be deployed in government while Mr Motlanthe remains as deputy president.

  Mr Ramaphosa's likely entry into government has a number of positive implications, especially for business, and will go some way towards reassuring investors that South Africa is a business-friendly destination. Mr Ramaphosa could become a key conduit between business and the ANC and will represent a concrete symbol of black entrepreneurship. Moreover, Mr Ramaphosa will complement the role of Mr Zuma, who has shown little interest in policy minutiae or the day-to-day work of government, which has at times led to indecision and inertia. In preparation for taking a more central role, Mr Ramaphosa is now undertaking a comprehensive review of his extensive business holdings in order to identify possible conflicts of interests that could undermine his impartiality.

  Although divisions persist within the ANC, especially between economic moderates and left-leaning interventionists, Mr Ramaphosa's rise is a victory for the pragmatic centre. He will enjoy more authority and influence than the current deputy president and will play a key role in devising and implementing policies geared towards accelerating growth and reducing poverty and inequality.

  December 21, 2012

• Background

  South Africa: Political forces at a glance

  Political outlook: Political forces at a glance

  Present government: The African National Congress (ANC) has dominated South African politics since the 1994 election brought an end to apartheid and white minority rule, and won another resounding victory in April 2009. The ANC, led by Nelson Mandela (1994-1999), Thabo Mbeki (1999-2007) and now Jacob Zuma, steadily raised its share of the vote to a high-water mark of 69.7% in 2004, although support fell away slightly to 65.9% in 2009. The ANC continues to hold a large majority of seats in parliament under South Africa's proportional representation system of voting. The party also retained eight of the nine provinces in 2009, but lost some ground in the 2011 municipal election. The ANC rules in partnership with the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP) in a tripartite alliance.

  Opposition: There are three main opposition parties in South Africa. The Democratic Alliance (DA), which mainly draws support from white and mixed-race voters, raised its share of the vote to 16.7% in 2009 (to remain as the official opposition) and captured the Western Cape. The DA increased its voting share to nearly 24% in the 2011 municipal ballot. The Congress of the People (Cope), which broke away from the ANC in 2008, took 7.4% of the vote in 2009 but has since lost ground because of a bitter leadership struggle. The Inkatha Freedom Party (IFP), a regional party based in KwaZulu-Natal, faded in 2009, winning 4.6% of the vote, and split into two factions in 2011.

  Parliamentary forces
  	1994		1999		2004		2009
  	% of vote	Seats	% of vote	Seats	% of vote	Seats	% of vote	Seats
  African National Congress (ANC)	62.7	252	66.4	266	69.7	279	65.9	264
  Democratic Alliance (DA)	1.7	7	9.6	38	12.4	50	16.7	67
  Congress of the People (Cope)	-	-	-	-	-	-	7.4	30
  Inkatha Freedom Party (IFP)	10.5	43	8.6	34	7.0	28	4.6	18
  Others	25.1	98	15.4	62	10.9	43	5.5	21
  Total	100.0	400	100.0	400	100.0	400	100.0	400

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  Next elections: The next parliamentary election is scheduled for April 2014.

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  June 27, 2012

• Structure

  South Africa: Political structure

  Official name

  Republic of South Africa

  Form of state

  A federal state, consisting of a national government and nine provincial governments

  Legal system

  Based on Roman-Dutch law and the 1996 constitution, in force since February 4th 1997

  National legislature

  Bicameral parliament elected every five years, comprising the 400-seat National Assembly and the 90-seat National Council of Provinces

  Electoral system

  List system of proportional representation based on universal adult suffrage

  National elections

  The next election is scheduled to take place in 2014

  Head of state

  President, elected by the National Assembly; under the constitution, the president is permitted to serve a maximum of two five-year terms; Thabo Mbeki resigned as president in September 2008, and Kgalema Motlanthe, the deputy president of the African National Congress (ANC), replaced him in a caretaker capacity; Jacob Zuma was sworn in on May 9th 2009

  National government

  African National Congress

  Main political parties

  The ANC is the governing party with the support, in a tripartite alliance, of the smaller South African Communist Party (SACP) and the Congress of South African Trade Unions (COSATU); other parties include Congress of the People (Cope; formed by ex-members of the ANC), the Democratic Alliance (DA), the Inkatha Freedom Party (Inkatha or IFP) and the Independent Democrats (ID)

  President: Jacob Zuma (ANC)

  Deputy president: Kgalema Motlanthe (ANC)

  Minister in the presidency, planning: Trevor Manuel (ANC)

  Minister in the presidency, performance: Collins Chabane (ANC)

  Key ministers

  Agriculture, forestry & fishing: Tina Joemat-Pettersson (SACP)

  Communications: Dina Pula (ANC)

  Defence: Nosiviwe Mapisa-Nqakulu (ANC)

  Economic development: Ebrahim Patel (ANC)

  Energy: Dipuo Peters (ANC)

  Finance: Pravin Gordhan (ANC)

  Health: Aaron Motsoaledi (ANC)

  Higher education: Blade Nzimande (SACP)

  Home affairs: Naledi Pandor (ANC)

  Human settlements: Tokyo Sexwale (ANC)

  International relations: Maite Nkoana-Mashabane (ANC)

  Justice & constitutional development: Jeff Radebe (ANC)

  Labour: Mildred Oliphant (ANC)

  Mining: Susan Shabangu (ANC)

  Police: Nathi Mthethewa (ANC)

  Public enterprises: Malusi Gigaba (ANC)

  Public works: Thulas Nxesi (SACP)

  Rural development & land reform: GuGille Nkwinti (ANC)

  State security: Siyabonga Cwele (ANC)

  Trade & industry: Rob Davies (SACP)

  Transport: Ben Martins (SACP)

  Central bank governor

  Gill Marcus

  December 13, 2012

• Outlook

  South Africa: Key developments

  Outlook for 2013-17

  • The president, Jacob Zuma, will try to strengthen the ruling African National Congress (ANC) and deliver socioeconomic development, but popular impatience and political in-fighting will make this a formidable challenge.
  • The ANC, under Mr Zuma or otherwise, remains well placed to secure another term in 2014, given mass support for the party, although victory would not be a foregone conclusion if the tripartite alliance fractured.
  • No major economic policy shifts are envisaged. Boosting economic growth, jobs and investment will remain the government's focus in 2013-17.
  • Real GDP growth will remain modest, rising to only 3.1% in 2013, largely as a result of weaker global and domestic conditions. Growth will edge up in 2014-17 in line with the global recovery and improving domestic conditions.
  • Gradual rand depreciation is forecast during the outlook period because of South Africa's persistent current-account deficit, relatively high inflation and political uncertainty surrounding the 2014 election.
  • The current-account deficit is forecast to narrow in 2013-15 as earnings growth quickens. The gap will widen slightly, to 4.9% of GDP in 2016 and 5.2% of GDP in 2017, as faster GDP growth and massive latent demand drive up imports.

  Review

  • Mr Zuma appears on course to be re-elected as ANC leader in December after the majority of ANC branches endorsed his candidature. However, a late challenge remains a possibility.
  • The Democratic Alliance (DA), the official opposition, re-elected Helen Zille, unopposed, as party leader in late November. The defection of another opposition parliamentarian to the DA earlier in the month highlighted growing support for the party.
  • South Africa will introduce a new restructured and reweighted consumer price index in January, in line with the latest income and spending survey. Higher weightings given to electricity and petrol may put upward pressure on inflation.
  • Real GDP growth slowed to 2.3% year on year in the third quarter, the weakest rate for ten quarters, because of widespread strike disruption and slack external demand. However, growth in each of the ten previous quarters was revised upwards.
  • The latest data from UNAIDS show that South Africa is having some success in combating HIV/AIDS. The death rate fell by 27% between 2005 and 2011, and the numbers receiving treatment jumped by 75% to 1.7m between 2009 and 2011.

  December 13, 2012

Economy:

• Background

  South Africa: Country fact sheet

  Fact sheet

  Annual data	2011a	Historical averages (%)	2007-11
  Population (m)	49.0b	Population growth	0.4
  GDP (US$ bn; market exchange rate)	401.9	Real GDP growth	2.8
  GDP (US$ bn; purchasing power parity)	557.9b	Real domestic demand growth	3.4
  GDP per head (US$; market exchange rate)	8,201b	Inflation	6.5
  GDP per head (US$; purchasing power parity)	11,386b	Current-account balance (% of GDP)	-4.9
  Exchange rate (av) :US$	7.3	FDI inflows (% of GDP)	1.8
  a Actual. b Economist Intelligence Unit estimate.

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  Background: South Africa became a full democracy in 1994, when it first held all-race elections. The African National Congress (ANC) won with more than 63% of the vote and has dominated all of the subsequent elections-in 1999, 2004 and 2009-by even larger margins. However, from a high-water mark of nearly 70% in 2004, support ebbed a little, to less than 66% in the latest ballot in April 2009. Jacob Zuma replaced Thabo Mbeki as ANC leader at a key conference in December 2007 and was sworn in as president on May 9th 2009, ushering in a further five years of ANC rule.

  Political structure: South Africa is a constitutional democracy with a bicameral parliament and an executive president elected by parliament. The constitution is the supreme law of the land. The 400-member National Assembly is elected by proportional representation; the Senate consists of indirectly elected representatives of the nine provinces. The judiciary is fully independent and includes a nine-member Constitutional Court. The constitution provides for an independent corruption watchdog, the public protector, and for independent commissions on human rights, gender equality and the restitution of land rights.

  Policy issues: Faster growth, job creation, black economic empowerment and correcting social imbalances-within the context of fiscal and monetary discipline-are the main aims of the government's medium-term economic policy. High unemployment remains a key challenge, exacerbated by trade union demands for higher pay and stricter labour laws. Divisions will persist between moderates and left-wingers, who seek greater state intervention in the economy, but pragmatism is likely to prevail and there are unlikely to be any major shifts in economic policy. Inflation targeting will be retained and fresh efforts made to tackle the HIV/AIDS crisis and skills shortages. Speeding land reform without damaging farm potential or alienating investors will remain a key challenge.

  Taxation: Value-added tax is levied at a flat rate of 14% with no exceptions. The corporation tax rate was cut from 29% to 28% on April 1st 2008. The secondary tax on companies was replaced on April 1st 2012 by a dividend tax at shareholder level (levied at 15%). The highest (marginal) rate of personal income tax is 40%.

  Foreign trade: South Africa has a relatively open economy, with foreign trade (imports plus exports) accounting for around 65% of GDP. The EU, the US and Japan are among its largest trading partners. Trade with Africa has increased significantly over the past ten years. The overall current-account deficit will have widened from 3.4% of GDP in 2011 to 6.2% of GDP in 2012 as the recovery sucks in imports, before narrowing in 2013-15 as earnings growth recovers.

  Major exports 2010	% of total	Major imports 2010	% of total
  Platinum	11.4	Petrochemicals	13.9
  Gold	10.4	Equipment components for cars	6.5
  Coal	6.7	Motor cars & other components	5.1
  Cars & other components	5.2	Petroleum oils & other	4.2
  Leading markets 2011	% of total	Leading suppliers 2011	% of total
  China	15.1	China	14.7
  US	9.1	Germany	11.5
  Japan	7.9	US	8.0

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  December 13, 2012

• Structure

  South Africa: Economic structure

  Data and charts: Annual trends charts

  
  

  

  December 13, 2012

• Outlook

  South Africa: Country outlook

  South Africa: Country outlook

  FROM THE ECONOMIST INTELLIGENCE UNIT

  POLITICAL STABILITY: The ruling African National Congress (ANC) will remain the dominant political force during the forecast period. However, the party will face several significant challenges that could threaten its unity in the build-up to the next election in 2014. The president, Jacob Zuma, now seems highly likely to secure re-election as the ANC leader at the key, five-yearly electoral summit at Mangaung in December--barring a late, successful challenge--thereby giving him a platform to win a second, five-year presidential term in 2014. However, Mr Zuma will continue to struggle to maintain the cohesion of the tripartite alliance between the ANC, the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP) because of deep divisions--over both policies and personalities--within and between its members.

  ELECTION WATCH: The ANC, under Mr Zuma or otherwise, remains well placed to secure another term in 2014, given mass support for the party, although victory would not be a foregone conclusion if the tripartite alliance fractured. There has long been speculation that the left will break away, leading to a political realignment and forcing thousands of members to choose sides. However, a split is unlikely, as COSATU and the SACP have consistently preferred to fight for influence within the alliance, while the ANC will remain reliant on their votes. The DA, the official opposition, will increase its share of the vote in 2014 but poses no immediate threat to the ANC's dominance.

  INTERNATIONAL RELATIONS: South Africa, with the largest and most advanced economy in Africa, will continue to play an important role in world affairs: the country's latest two-year stint on the UN Security Council ends on December 31st 2012. The country will remain deeply engaged with Africa, particularly Southern Africa and, above all, Zimbabwe, where the sociopolitical crisis has produced a flood of refugees to South Africa. An enforced power-sharing agreement between Zimbabwe's president, Robert Mugabe, and the prime minister and main opposition leader, Morgan Tsvangirai, remains intact, but tensions surrounding the next election, in 2013, will escalate. An enduring settlement in Zimbabwe would give a substantial boost both to Mr Zuma's credibility and to regional integration. South Africa will seek to build closer "South-South" ties (especially with China, India and Brazil) and maintain close relations with the EU and the US. Gaining a permanent African seat on the UN Security Council will remain a key aim.

  POLICY TRENDS: The main challenge facing policymakers in the early part of the forecast period will be to expedite the country's recovery from the current downturn by maintaining stimulus measures (including a budget deficit and cheap money). At the same time, the authorities will need to guard against macroeconomic imbalances, mitigating the risks associated with global economic fragility. Gradual changes that have emerged since mid-2011 in South Africa's macroeconomic policy framework will become more evident in the medium term. The main test will be to overcome the structural barriers (such as skills shortages) that prevent the country's economy from entering a phase of faster, more labour-intensive growth. Although new initiatives are needed, especially to deal with deep-rooted problems such as high unemployment, stark inequality, skills shortages, crime and HIV/AIDS, there is a risk of conflict and inertia (or both) in the absence of decisive leadership. The expected completion of major infrastructure projects will facilitate business activity, but there will be new challenges in the form of stricter anti-competition laws and steep rises in electricity tariffs.

  ECONOMIC GROWTH: The Economist Intelligence Unit forecasts a modest upturn in the South African economy, with real GDP growth edging up from an estimated 2.6% in 2012 to 3.1% in 2013. However, key economic indicators, particularly in sectors with greater export exposure, such as mining and manufacturing, suggest that growth will remain relatively sluggish. Activity will be held back by the euro zone debt crisis and the residual impact of widespread and unauthorised strikes across a number of key sectors in 2012, and new strikes may break out in 2013. We expect growth to rise to 3.8% in 2014, in line with the modest global economic recovery. However, persistent structural constraints, including skills shortages, high unemployment, crime, corruption and inefficient parastatals, will act as a drag on growth. Fiscal consolidation will also affect both household and government consumption, and uncertainties in the build-up to the 2014 election may deter private investment. On the plus side, the expansion of the black middle class will facilitate consumer spending on durable goods and services such as telecommunications and banking. We expect growth to pick up slightly towards the end of the forecast period, rising to 4.5% in 2016 and to 5.2% in 2017, helped by the start-up of new transport networks and power stations (which will boost energy-intensive sectors), although structural constraints will persist. Growth in 2015-17 will also benefit from a more accommodating global environment and an increase in regional trade. Nevertheless, a negative external balance will continue to weigh on growth throughout the forecast period.

  INFLATION: Sound policies, sluggish consumer demand and spare industrial capacity will help to keep inflation in check, but upward pressure will come from steep rises in electricity prices and wage increases. The upcoming revisions to the consumer price index basket in January also pose some upward risks to inflation, although we expect commodity prices to continue to moderate in 2013, albeit marginally. Average inflation will return to the 4-5% range in 2013-15, helped by more stable commodity prices, subdued economic growth, stricter competition policy and efficiency gains arising from infrastructure investment. Apart from temporary breaches, inflation will remain below the 6% target ceiling. Owing to ongoing wage rises, a tight labour market and rising fuel prices, inflation will rise in the final two years of the forecast period, to 5% in 2016 and 5.6% in 2017.

  EXCHANGE RATES: We expect the rand to move within the R8.5-9:US$1 range for the final month of 2012 after it slipped to an average of R8.8:US$1 in November, owing to concerns about strikes and the downturn in Europe. We expect a temporary rebound in early 2013 but continue to forecast gradual rand depreciation in 2013-17 because of South Africa's persistent current-account deficit, relatively high inflation and political uncertainty surrounding the 2014 election. The volatile nature of foreign portfolio investment--a vital component in financing the current-account deficit--will continue to pose a significant threat to currency stability. We expect the rand to decline from an estimated average of R8.23:US$1 in 2012 to R8.45:US$1 in 2013. It will subsequently drift to R9.33:US$1 in 2017, although exogenous shocks or unwelcome policy shifts could lead to a faster decline.

  EXTERNAL SECTOR: We estimate that the current-account deficit will have widened from 3.4% of GDP in 2011 to 6.2% of GDP in 2012. Exports will shrink in 2012, owing to fragility in key OECD markets and weaker commodity prices, thereby producing a merchandise trade deficit. However, merchandise exports will grow slightly more quickly than imports in 2013-17 (on an average annual basis), reflecting a pick-up in global demand. The far larger invisibles deficit (comprising services, income and current transfers) will remain throughout the forecast period, underpinned by income outflows to foreign investors and transfers to fellow members of the Southern African Customs Union. However, a gradual decline in the invisibles deficit in 2013-17 (helped by tourism and income earned by outward investors), combined with stronger exports, will narrow the current-account deficit from 5.5% of GDP in 2013 to 4% of GDP in 2015. The gap will widen in 2016 and 2017, to 4.9% and 5.2% of GDP respectively, as faster GDP growth and huge latent demand drives up imports.

  December 07, 2012

• Forecast

  South Africa: Country forecast summary

  Country forecast overview: Highlights

  • The president, Jacob Zuma, will struggle to maintain the cohesion of the tripartite alliance between the African National Congress (ANC) and its trade union and communist partners because of divisions over policies and personalities. These splits may come to a head in December 2012, when the ANC holds its next five-yearly electoral summit.
  • Mr Zuma could face a leadership challenge (and perhaps become a one-term president) but is likely to retain his position, as the ANC will want to avoid a damaging power struggle. Unless the alliance splits, the ANC is likely to score another victory in the 2014 election.
  • High unemployment, income inequality, slow land reform and poor service delivery are likely to spark regular protests during the forecast period by disgruntled shanty-town dwellers and other disaffected groups, some of which may turn violent.
  • Gradual changes that have emerged in South Africa's macroeconomic policy framework since mid-2011 will become more evident in the medium term. The main test will be to overcome the structural barriers (such as skills shortages) that prevent South Africa from entering a phase of faster, more labour-intensive growth.
  • The monetary environment will be accommodating—as inflation within the target range of 3-6% leads to a period of relatively stable interest rates—although the exchange rate will remain fairly volatile (as the rand is market-determined and widely traded).
  • Real GDP will remain modest, rising to only 3.1% in 2013, owing largely to weaker global and domestic conditions. Growth will edge up in 2014-17 in line with the global recovery and improving domestic conditions.
  • Provided that the euro zone debt crisis does not spiral out of control, we continue to forecast gradual rand depreciation in 2013-17 because of South Africa's persistent current-account deficit, relatively high inflation and political uncertainty surrounding the 2014 election.
  • The current-account deficit is forecast to narrow in 2013-15 as earnings growth quickens. The gap will widen slightly in 2016 and 2017, to 4.9% of GDP and 5.2% of GDP respectively, as faster GDP growth and massive latent demand drives up imports.

  

  December 13, 2012

View detailed map

Country Briefing

Land area

1,219,090 sq km (Eastern Cape: 169,580; Free State: 129,480; Gauteng: 17,010; KwaZulu-Natal: 92,100; Limpopo: 123,910; Mpumalanga: 79,490; Northern Cape: 361,830; North West: 116,320; and Western Cape: 129,370)

Population

48.7m (2008 estimate, Statistics South Africa)

Main towns

Population, '000 (2001 official estimates); metropolitan areas:

Johannesburg: 3,226

East Rand/Ekurhuleni: 2,480

Durban/Ethekwini: 3,090

Pretoria/Tshwane (capital): 1,986

Cape Town: 2,893

Port Elizabeth/Nelson Mandela Bay: 1,006

Climate

Temperate, warm and sunny

Weather in Johannesburg (altitude 1,769 metres)

Hottest month, January, 14-26°C (average daily minimum and maximum); coldest month, July, 4-16°C; driest month, June, 6 mm average rainfall; wettest month, January, 150 mm

Weather in Cape Town (altitude 17 metres)

Hottest month, February, 16-26°C (average daily minimum and maximum); coldest month, July, 7-17°C; driest month, February, 10 mm average rainfall; wettest month, July, 92 mm

Languages

Official languages: Afrikaans, English, IsiNdebele, Sepedi, Sesotho, Swazi, Xitsonga, Setswana, Tshivenda, IsiXhosa and IsiZulu; other African, Asian and European languages are also spoken

Measures

Metric system

Currency

Rand (R) = 100 cents; average exchange rate in 2010: R7.32:US$1

Fiscal year

April-March

Time

2 hours ahead of GMT

Public holidays

January 1st (New Year's Day), March 21st (Human Rights Day), Good Friday, Easter Monday, April 27th (Freedom Day), May 1st (Workers' Day), June 16th (Youth Day), August 9th (National Women's Day), September 24th (Heritage Day), December 16th (Day of Reconciliation), December 25th (Christmas Day), December 26th (Day of Goodwill); if any of these days falls on a Sunday, the following Monday becomes a public holiday

March 23, 2012