The sugar high runs out

9 December 2024 - Is GNU growth optimism justified after poor GDP data? How does Ramaphosa's reshuffle impact leadership credibility? Will Namibia’s disputed elections heighten regional risk? Why is South Korea’s democracy under global scrutiny?

The sugar high runs out

Third-quarter GDP data surprised to the downside. The major driver behind the 0.3% contraction was the agriculture sector’s performance, with drought conditions plaguing farmers across the country. This sector registered its second consecutive quarterly drop, this time of 28.8%. For the economy as a whole, year-on-year growth was positive in Q3, at 0.3%.

The largest positive contributions to overall GDP were made by the electricity, gas and water sector at 1.6%, finance, real estate and business services at 1.3%, and mining and quarrying at 1.2%. Despite construction delivering its biggest increase in two years at 1.1%, that sector, along with manufacturing at 0.5%, are not delivering growth rates one would expect on the back of more reliable electricity supply.

Despite the boost afforded to market sentiment following the formation of the Government of National Unity (GNU), substantive barriers to higher growth rates remain in place in policy and legislation. The GNU confidence boost risks being only a sugar high. This is seen, for example, in the fact that gross fixed capital formation increased by only 0.3% in Q3. For real growth to occur, much higher levels of fixed investment are indispensable.

On the back of the disappointing Q3 figure, the South African Reserve Bank’s forecast of 1.1% GDP growth in 2024 looks unlikely to be achieved. At the launch of Phase 2 of the Government - Business Partnership on 1 October the government communicated an ambitious GDP growth target of 3.3% by the end of 2025.

Excluding the bounce back in GDP in 2021, the last time growth was above 3% was in 2011 (3.2%). In the absence of more aggressive policy reforms, the GNU is unlikely to repeat that feat in 2025.

Compromised president

President Ramaphosa has “solved” an ongoing cabinet personnel headache by shifting around some chairs. Far from suspending or taking more decisive action against his justice minister, Thembi Simelane, after a barrage of corruption allegations, Mr Ramaphosa decided to get her to swap her portfolio with that of the human settlements minister, Mmamoloko Kubayi. To the extent that he does not act against compromised cabinet members, this reshuffle indicates the president is either himself ethically compromised or does not have the political confidence to act meaningfully against compromised individuals.

Mr Ramaphosa has reiterated time and time again that the ANC is on a path of renewal. In the case of Ms Simelane, Mr Ramaphosa finally acted after many months of inaction. However, his chosen action was so devoid of impact that it reinforces the impression of him as the ultimate non-decider. A Government of National Unity led by an indecisive president is unlikely to produce the aggressive reforms South Africa needs to achieve higher economic growth rates.

Democracy wobbles in Namibia

Elections held in Namibia on 27 November saw the governing SWAPO party  and its candidate for president, Netumbo Nandi-Ndaitwah, emerge victorious. However, there were widespread problems with the elections, with technical errors and ballot paper shortages seeing long queues and voting being re-opened extended on 29 and 30 November at some polling stations in some parts of the country.

Final results saw Ms Nandi-Ndaitwah win 58.1% of the vote, making her the first woman president of Namibia. The only other candidate to win more than ten percent of the vote was Panduleni Itula, of the Independent Patriots for Change (IPC), winning 26%. Mr Itula had previously run as an independent in 2019, when he won nearly 30% of the vote.

In the parallel parliamentary election, SWAPO won 53.4% of the vote, giving it 51 of the 96 directly elected parliamentary seats, its worst showing ever in a post-independence parliamentary election, but enough for a majority in Namibia’s proportional electoral system. Between the 2019 election and the 2024 edition, SWAPO lost 12 seats, following a 14-seat loss between 2014 and 2019. The IPC won 20 seats and 20.1% of the vote. No other party won more than ten percent of the vote, but altogether eleven other parties secured enough support for representation in the country’s parliament.

However, opposition parties have rejected the results and will be going to court to challenge irregularities in the voting process that appear to have systematically favoured the incumbent party. It seems that time for voting was generally only extended in SWAPO strongholds, particularly in the north of the country, and not in places where the opposition traditionally does well. In addition, there seems to be credible evidence of voter suppression, by not making available sufficient voting stations in areas where the opposition was strong, as well as ballot stuffing, again in the north of the country.

The risk of violence is low. No protests have erupted like those seen in Mozambique following that country’s election in October. The opposition IPC and its presidential candidate have repeatedly emphasised that they believe disputes should be fought in courts and not in the streets. Nevertheless, the rejection of the results by opposition parties shows that Namibia’s democracy may be more fragile than it appears on the surface. The risk of violence and a crackdown by the government cannot be ruled out, although it remains unlikely. Nonetheless, political risk in Namibia is now heightened following what might have been electoral fraud by SWAPO and the rejection of results by opposition parties. The theory that SWAPO might have manipulated the elections is bolstered by claims of a delegation of Zimbabwe’s ruling ZANU-PF party being in the county during the elections, as well as confirmed repeated trips from senior SWAPO personnel to Zimbabwe, where elections are dogged by persistent and credible claims of fraud, in the build-up to the elections.

Namibia’s economy is set to benefit from major oil and gas finds off the country’s coast. It remains to be seen whether this seemingly authoritarian turn by the government will affect this. Authoritarian countries are not necessarily hostile to investment, but benefits from investment are less likely to flow down, as authoritarian governments – by definition – are less concerned with the concerns of ordinary people and voters than democratic ones. In addition, Ms Nandi-Ndaitwah is viewed to be more left-wing than most of her presidential predecessors, and her economic policy proposals, as described in her campaign speeches and election manifesto, rely heavily on state interventionism. However, the benefits from the various oil discoveries might be enough to boost the Namibian economy, with Ms Nandi-Ndaitwah’s policy interventions not retarding economic growth as would have been the case without the oil windfall.

South Korea’s democracy is tested, holds

At 10.27pm local time on 3 December, the South Korean president, Yoon Suk Yeol, surprised local politicians and the international community by declaring martial law. His decree banned all political activities, banned the legislature and political parties from meeting, banned all protest, banned all strikes, and placed strict controls over the media.

Mr Yoon had been facing major political scandals and growing hostility in his relationship with the opposition Democratic Party, which holds a majority in the legislature. Polling suggested that his approval rating was around 17% before 3 December. Mr Yoon was also facing investigations into his wife’s business activities and those of top officials in his government.

Shortly after the declaration of martial law, police and army units moved to take control of several important locations, including the national assembly. This appears to have been an attempt by the president to perform a self-coup, where a ruling political leader uses the armed forces to remove restraints on his power. 

An angry crowd arrived at the national assembly, along with significant numbers of opposition legislators. Troops attempted to block access to the building but opposition legislators climbed the walls with the help of the crowd and forced their way past soldiers to enter the legislative chamber. There a session was convened and 190 of the 300 members of the legislature voted at 01.02am to end the martial law declaration. Soldiers attempted to disrupt the proceedings but were ordered by the speaker of the legislature to leave after the vote and complied with the instruction. 

This strange episode has spooked many in South Korea, who saw it as a blatant attempt to return the country to the dictatorial military rule it was under from the 1950s until the 1980s. A major crisis has developed in Korea as the opposition seeks to impeach the president for the declaration. In a TV broadcast to the nation on Saturday, the president apologised for his actions but did not offer the expected resignation. His act of contrition will not be enough to calm the anger of South Korean opposition or voters. Politics in the country will now become singularly focused on seeking accountability for the self-coup attempt. There is a high risk of social unrest until Mr Yoon resigns, is impeached or until the next election.