Recently, a little document has leaked out onto black twitter. A kind soul has let me have a copy, which I have provided below for your perusal. It is short, but certainly longer than the first-page screenshot most of you will have seen.
It was written by Simon Fremantle, a rather respected political analyst, and concerns the likely fallout from the president’s recent position concerning the oversight report into Phala Phala, whose publication triggered a sell-off of South African national bonds, causing the Rand to dip 1.1% at a time while other countries are benefitting from the US Federal Reserve’s recent interest rate hike.
An independent parliamentary panel has determined that there is a case for the president to answer regarding the Phala Phala matter. The panel’s finding was predominantly based on its concerns over the extent and viability of the president’s response to the allegations made against him, rather than on any compelling evidence that it has been provided with that proves that the president has indeed violated the Constitution. This underlines the extent to which the president has mismanaged his response to former SSA head Arthur Fraser’s initial affidavit, and the suspicions of impropriety that have been allowed to develop since.
In our view, there are three options available to the president – each of which carries varying degrees of political, institutional, and policy risk. The main options below align to our recently published base case and low-road scenarios (see here).
First: stay and fight (60% probability). After early suggestions that the president was preparing to resign, it has since emerged that he is consulting his allies on his options and is being vigorously lobbied to remain as party and state leader. Should the president seek to take this approach, it would need to be hinged on a legal review of the independent panel’s findings. At first glance there do appear to be aspects of the panel’s recommendations that warrant such a review, though there is certainly no guarantee that the review would be successful. Under such a scenario, the president would need to secure the backing of the ANC NEC (which meets at 14:00 [SAST] today). The ANC’s caucus may also then vote against the panel’s report during next week’s special parliamentary sitting, arguing that the legal review that has been initiated suspends its applicability. Such an outcome would buy the president time, allowing his allies to defend him within ANC structures. It is also important to emphasise that actual impeachment would need to be supported by two-thirds of MPs – a threshold that is very unlikely to be reached. We would then expect that the president would then still contest – and likely win – the ANC presidential race later this month. However, as we emphasised in our abovementioned scenario outlook note, we would expect the president’s ability to forcefully shape the composition of the rest of the top six to be diminished under this scenario, which could have important longer-term implications for his internal political authority. That said, much in this outcome would rest on how convincing the president’s argument is in framing his decision to review the panel’s findings. Here, we expect that the president will emphasise that those who stand to benefit most from his resignation are ensconced in the state capture networks that he has fought so hard to unravel.
Implications of this approach. This would provide some calm to the markets and to investor sentiment more broadly. The president would also be able to maintain his defence of critical governance reforms. However, there would be significant criticism that the president and the ANC are adopting a similar approach to the Phala Phala matter as they did with former president Zuma’s Nkandla scandal. The optics of this would be challenging for the president to manage and contain. Further, should the president remain in office, Phala Phala risks would remain in focus throughout next year given not only the unfolding of the parliamentary process, but also the outcomes of the Public Protector and Hawks investigations (around which we had already, prior to this week’s events, assigned a 10-20% probability that the president could be pressed to step aside).
Second: resign (30% probability). The president may succumb to pressure to ‘do the right thing’ and resign (rather than step aside) as state leader and relinquish his ANC re-election campaign. Under such a scenario, Deputy President David Mabuza would immediately assume presidential duties, with parliament required to elect a new president within 30 days. It is conceivable that Mr Mabuza could stay on as president until a new ANC leader is elected (later this month), and then a special sitting of parliament could be called to elect the new party leader as state president. However, only MPs can be elected as president, meaning that parliament would first need to appoint the new ANC president as an MP (if the candidate in question is not already an MP) before electing this same person as state leader. This process could take time, drawing out Mr Mabuza’s caretaker role into 2023. As we have outlined in various recent reports (see here, for instance), we believe that Paul Mashatile would be the primary beneficiary of such an outcome, using his strong cross-province support (including in ostensibly pro-Ramaphosa provinces such as Limpopo and Gauteng) to elevate his DP campaign to a presidential campaign. Mr Mashatile would then rely on being nominated from the floor at the ANC conference and would contest against Zweli Mkhize for the party leadership (other candidates may also be nominated from the floor to join the presidential race, of course).
Implications of this approach. Such an outcome would initiate a prolonged period of dramatic uncertainty – and elevated investor concern. This would in effect constitute the low-road outcome we recently sketched out in the abovementioned scenario note. We believe that the most pronounced consequences of such an outcome would be felt through the governance channel, with a clear reduction in political air cover for key Anti-Corruption Task Team institutions such as SARS, the NPA, and the SIU. Concerns around the durability of political support for Finance Minister Enoch Godongwana and Eskom management would elevate too. While both Mr Mashatile and Dr Mkhize would almost certainly seek to reassure business and argue that their leadership will provide policy continuity (and, importantly, neither Mr Mashatile nor Dr Mkhize are closely aligned to the ANC’s RET faction), the longer-term threat of a more pronounced ANC electoral decline and the commensurate risk of an EFF coalition (which Mr Mashatile is, in our view, amenable to) would present profound risks. Further, under such a scenario the RET faction would almost certainly regain a firmer footing in the NEC, thus further undermining the governance and economic policy reforms that President Ramaphosa has sought to pursue.
Third: remain as head of state but relinquish the ANC presidency at the upcoming conference (10% probability). There is a third, though admittedly far less likely, outcome to this unfolding situation, which is that the president could remain as state leader in the interests of stability and continuity but withdraw his nomination for the party leadership race. This would neutralise the challenge to him within the ANC and allow time to transition to the new party leader (which we would still expect to be either Mr Mashatile or Dr Mkhize). Under such a scenario, President Ramaphosa would step down as state leader at some point next year.
Implications of this outcome. This outcome would provide some of the short-term reprieve of scenario one but would maintain all the longer-term unease of scenario two. It is, in effect, a clumsy compromise to a very challenging political dilemma. In our view, such a scenario would only be viable if there was a stalemate in the NEC around which of the above first two paths should be followed, and conversation then moves towards a middle-road outcome that accommodates the demands of the competing internal factions.
Next steps. The two next developments to watch will be (a) whether the president announces that he will be taking the panel’s findings on legal review (which would imply that he is following scenario one above); and (b) the outcome of the ANC’s NEC meeting, which will begin at 14:00 today and likely run well into the night (and that will determine whether scenario one is politically possible for the president). We would caution against following media leaks from this meeting as there are constituencies that will certainly seek to distribute [mis]information that aligns with their own political interests.
This is a very sound little analysis, by someone far more experienced than I. It will not take a genius to work out the consequences of a DD Mabuza presidency and a return of RET factional control to the ANC.
Certainly it will make the DA’s intended 2024 coalition with the ruling party a far harder sell, and the likelihood of an ANC/EFF coalition that much more likely. At present, I have heard rumours (unsubstantiated, but plausible nonetheless) about am ANC-IFP coalition under a Ramaphosa presidency. This would be the most stable outcome possible, but it’s seeming a little less likely given the recent developments, which will only serve to depress ANC turnout at the next election. Still, the IFP’s 6.3% will most likely be sufficient to keep the centre intact.
But one thing that I notice missing from this is the effect scenario 1 has on the post-2024 political cycle. As those with passing memory function may recall, both prior elected presidents have had their tenure cut short by internal party coups in their second term, leaning heavily on scandals relating to corruption.
In Mbeki’s case, the attempt to prosecute Zuma for corruption backfired severely, (especially since the arms deal scandal had severely undermined his credibility), and in Zuma’s case, he underestimated the strength of financial heft behind his opponent at the ANC conference, whose promises of clean and liberal governance attracted a great deal of backing from the usual suspects in our oligarchic economy.
This time, while the international and local markets, as well as the media class do favour Ramaphosa, they have become rather jaded by his limited and ringfenced anti-corruption campaign, as well as his corruption, lack of charm, and habit of begging for money at all available opportunities.
The possibility of Ramaphosa surviving his next leadership challenge seems slim at best, unless he manages to perform an economic miracle (haha). this leaves DD Mabuza and Paul Mashatile comfortably lined up to take him out.
Ultimately, a smooth transition to a coalition of the Liberals and ANC moderates will rest on the strength of Ramaphosa, which is looking worse every day. The DA’s argument for selling the coalition package is that they are working with the “sensible” and “moderate” elements in the ANC, which may have sold two years ago, but now looks extremely foul.
And given that this is a public stance, not a private one, it will severely impact their electoral performance in the run-up to 2024. Meanwhile, and unless their current declining trend reverses, and they are currently at 53.4% in the province, the DA will need to seek a coalition partner for the Western Cape.
The threat of being rebuffed by the ANC will make the ANC seriously consider insist on running the Western Cape with them as a quid pro quo (unless they are stupid, and they are never stupid about balance of forces). After all, forming a coalition with the DA will be as harmful, if not more, to the ANC than it is to the DA. They will receive all the usual accusations of race-betrayal, and the RET faction, already in charge of KZN, will have the strongest argument for leading the 2nd phase of the National Democratic Revolution.
The DA’s only alternative is to abandon the ANC coalition, and look to the Vreiheids Front Plus, who will demand a referendum on Cape independence.
I’m thinking 2024 might not be so bad.
But the DA have been behaving extremely erratically recently (don’t let their criticisms fool you, this was their education department that did this. And this), and my confidence in their capacity for rational strategy is sinking.