Early tremors signalling a seismic shift?

14 October 2024 - In this week’s Risk Alert we cover the following topics. We begin with positive signs of a possible broader shift in government rhetoric, policy, and legislation. Next, the City of Tshwane has a new mayor. Thereafter we continue with our recent analysis of water infrastructure challenges in Gauteng, as well as detection of cholera in sections of the Harts and lower Vaal Rivers. We close with a look at the rocky start for the Starmer administration in the UK.

Early tremors signalling a seismic shift?

Last week the Government of National Unity reached its 100-day mark. Improved market appetite for South African stocks and bonds and a stronger Rand are decidedly positive signs, but the difficult work of structural reform lies ahead. Still, there are multiple signs that a seismic shift is underway within government, and in the relationship between government and business.

Movement on bringing the fast, satellite-based internet connections provided by Elon Musk’s Starlink service to South Africa is a case in point. This highly desirable product has not been available in South Africa, reportedly for reasons related to South Africa’s onerous, race-based empowerment requirements. As a result, Starlink is available in other sub-Saharan African countries, but not in South Africa.

But on 4 October 2024, the minister of communications, Solly Malatsi (DA), released a statement saying that he would issue a policy directive to the Independent Communications Authority of South Africa (ICASA) to clarify the government’s position on these empowerment rules. The minister suggested ICASA consider an alternative approach to empowerment: “Equity equivalents, recognised in other sectors, provide an avenue for factoring in alternative ways for companies to make an impact on South Africa’s socioeconomic development.”

Another example: on Wednesday last week, the minister of home affairs, Leon Schreiber (DA), gazetted changes to visa rules designed to make it easier for South African businesses to hire skilled foreign workers and for remote workers to come and work in South Africa, measures designed both to boost South Africa’s competitiveness and its tourism industry.

Next, there are hints of a step-change in the country’s geopolitical stance, at least in rhetoric. South Africa’s international relations minister, Ronald Lamola (ANC), termed Hamas’s actions in Israel on 7 October 2023 an “atrocity” and a “heinous crime.” Upon returning to South Africa after visits to the US, UK, China, and various African countries, he toldBusiness Day: “We have proposed an annual type of engagement instead of only engaging when there is a controversy. Both Dirco and the DTIC [the Departments of International Relations and Cooperation and of Trade, Industry, and Competition] left the US with a positive outlook.”

Finally, last weekNews24 published a series of articles about BEE under the headline: “Is the BEE party over?” Three authors, namely Lumkile Mondi of Wits University, Moeletsi Mbeki, and IRR Fellow Gabriel Crouse, penned pieces critiquing BEE and highlighting its devastating consequences. That a major news outlet is publishing such critical views shows that cracks are beginning to appear in the consensus that race-based social engineering is effective or desirable. This development, like the others noted above, highlights that different ways of thinking about South Africa’s problems and potential solutions are receiving much more attention than before. There are no more holy cows.

New Tshwane mayor

South Africa’s fifth-largest metro now has an ActionSA mayor. On Wednesday, with the support of the ANC, EFF, and a handful of smaller parties, the party’s Nasiphi Moya was elected as mayor of the City of Tshwane, becoming the city’s fourth mayor in three years. Although she has not appointed a mayoral committee and executive team yet, it is expected that the ANC could be given the deputy mayor position and up to five positions on the mayoral committee, with the EFF also likely to secure seats on it.

Ms Moya, a former DA member and staffer, becomes ActionSA’s first mayor. It is also the first time that the ANC is back in government in the capital city in over eight years.Ms Moya’s elevation goes against a recent ANC resolution which said that when it was the largest party in a governing municipal coalition it should hold the mayoralty, which has seen Johannesburg and Ekurhuleni get ANC mayors after spells of having politicians from small parties in that position.

Tshwane has proved a difficult place to govern. Various DA-led administrations since 2016 have struggled to stabilise the city and its finances. The Auditor-General said in September that there was doubt that the municipality could continue as a going concern. However, it did seem former mayor, Cilliers Brink, was starting to turn around the finances and other metrics, with the Auditor-General commending Tshwane for its improved audit outcomes this year.

It is too early to say whether the new coalition governing Tshwane will be able to continue stabilising the city. However, in Gauteng’s other metros where the ANC and the EFF have governed together governance has deteriorated, with the relationship between the two parties also becoming more strained, leading the ANC to try distance itself from the EFF in Ekurhuleni.

However, ActionSA’s recent behaviour may have dealt it a blow, especially with voters who saw it as a bulwark against the ANC. Polling from the Social Research Foundation found that the party was only polling at about 1.5% in Gauteng in September. Given that it won nearly 10% of the vote in the province in the 2021 municipal election and 4% in May’s provincial election, this is a serious reverse for ActionSA, more so if the polling is replicated in the next municipal election, likely to be held in late 2026.

Cholera stalks the water

Routine water sampling conducted by the Department of Water and Sanitation (DWS) in September indicated that sections of the Harts and lower Vaal Rivers, specifically the Wentzel Dam, Schweizer Reneke, Christiana, Barkley West Caravan Park, and Douglas Weir sites contained traces of cholera. On 9 October the department alerted citizens that raw water from these five sites must not be consumed. At the time of writing no one in these areas had contracted cholera.

While communities upstream from the lower Vaal area, such as in the large population concentrations in Gauteng and Mpumalanga, will not be affected, it is a development indicative of inadequate water resource management and treatment. As detailed in the 3 October CRA client note, Day Zero in Gauteng, as well as the 23 September Risk Alert, Taps run dry, Gauteng’s major metros are at serious risk of regular, prolonged water supply outages, with dire consequences for businesses and citizens.

On 12 October Rand Water issued an alert warning municipalities and citizens that “Water storage levels throughout Gauteng Province have significantly declined due to excessive water withdrawals by municipalities, raising serious concerns.”

A rocky start for Starmer

Two days after South Africa's GNU took office, Keir Starmer became the UK's first Labour prime minister since Gordon Brown. With a 174-seat majority and a decimated Tory opposition, Mr Starmer had a significant political mandate. However, his tenure quickly faced turbulence. Far-right riots erupted mere weeks into his premiership, and he was criticised for mishandling the situation by delaying an emergency response meeting. His chancellor, Rachel Reeves, then sparked controversy by announcing that the government would be cutting winter fuel payments to pensioners, causing internal splits within Labour.

Meanwhile, the Conservatives launched a leadership contest to replace Rishi Sunak, caretaker since the disastrous election in July. Kemi Badenoch and Robert Jenrick, both on the right of the party, emerged as the final two candidates on the membership ballot. Ms Badenoch, the clear favourite, is running on a platform of free-market reforms and reducing government size. The final leadership result will be announced on 2 November.

Mr Starmer’s early struggles could embolden the hard left, who view his centrism on economic and foreign policy as a betrayal of Labour’s legacy, likely leading to tensions within the party's large parliamentary caucus and pressure to tack left so as to keep his most vocal MPs on the hard left in line.