A Season of Uncertainty and Promise: SA Political Prospects to - - PowerPoint PPT Presentation

A Season of Uncertainty and Promise: SA Political Prospects to 2019 & Beyond

Public Affairs Strategic Communications 16 February 2016

In this Presentation…

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1. About FTI Consulting 2. Status Quo 3. Likely Future Scenarios 4. Immediate Term: Key SONA Take-Outs on Approach to the Economy 5. Recommendations

About FTI Consulting: Globally, In Africa and in South Africa

NYSE-Listed Firm Advising Advising Across the Globe, in SA and across Africa

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4,400+ Professionals Deployed in 26 Countries, with

• ffices in South Africa and

affiliates in 30+ other African countries

FTI Consulting South Africa

Offices in Johannesburg and Cape Town Team of experienced media, investor, public affairs and strategic communication consultants BEE Level 2 certification – July 2015 Economic Consultancy started in April 2015

Our Public Affairs practise exists in our Strategic Communications Segment, which is supported a broad range of capabilities from other segments of our company

Corporate Finance/ Restructuring Economic Consulting Forensic & Litigation Consulting Strategic Communications Technology

Bankruptcy Support Services Interim Management Investment Banking Litigation Support Office of the CFO Performance Improvement Private Equity Advisory Restructuring/Turnaround Services Transaction Advisory Services Valuation & Financial Advisory Services Antitrust & Competition Economics Business Valuation Center for Healthcare Economics and Policy Intellectual Property International Arbitration Labor & Employment Public Policy Regulated Industries Securities Litigation & Risk Management Business Insurance Claims Compliance, Monitoring & Receivership Construction & Environmental Solutions Dispute Advisory Services Financial & Data Enterprise Analytics Financial Services Forensic Accounting & Advisory Services Global Risk & Investigations Practice Health Solutions Insurance Intellectual Property Trial Services Corporate Communications Digital and Consumer Communications Crisis Communications Employee Engagement and Change Communications Financial Communications Litigation Communications M&A Communications Public Affairs Restructuring and Financial Issues Shareholder Activism and Proxy Advisory Strategy Consulting & Research Computer Forensics & Investigations Discovery Consulting E-discovery Software & Services Managed Review Predictive Discovery

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Status Quo

Where Are We Now?

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Rapid Successions of Capitulations for President Zuma

• Nenegate
• #FeesMustFall
• Nkandla

SONA & Budget

• February 2016

Local Government Election

• August 2016

ANC Policy Conference

• June/July 2017

ANC Elective Congress

• December

2017

Quo Vadis?

• 2018, 2019 &

Beyond

Repeat in 2017? Best probability for a leadership change?

What Are the Likely Leadership Succession Scenarios? What are the likelihood of policy changes and greater policy certainty? Wjat are the Implications for Building Trust Between Business and Govt?

3 Key Drivers of our Political Future

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ANC performance on the economy, municipal delivery, education and social welfare The polarising potential of the ANC succession race The ANC’s ability to grapple with it’s electoral fortunes

3 Likely Future Scenarios

The way these drivers interact could lead to one or a a hybrid of future scenarios (1)

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• The ANC slows drop offs in electoral support by winning back some urban and black middle

class support during the 2016 local government elections.

• The President regains his powers of enjoinment and unites his supporters behind

Nkosazana Dlamini-Zuma.

• Likelihood of replacement for cabinet members in key portfolios arise after the LGE and for

replacing the Deputy President after the 2017 elective conference, with President Zuma remaining in his position.

• Fiscal discipline is stays in the balance as SOE reform yields to nested interests, subverting

social and delivery spending and becoming ever more entrenched and more challenging to reign in as the 2019 election approaches.

Scenario 1: An Anointed Successor: “Continuity & Change”

The way these drivers interact could lead to one or a a hybrid of future scenarios (2)

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• ANC haemorrhages middle-class and urban black support, with a protest-ridden election

campaign failing to return many election candidates to office.

• Spurned ex-local government councillors and 2019 election hopefuls help swing

constituencies toward supporting Deputy President Ramphosa as the alternative.

• President Zuma does not endorse a successor in favour of party unity.
• Zuma completes his term increasingly with Ramaphosa as the de facto President, albeit

with the latter careful not to draw backlash from sections of the Tripartite Alliance sympathetic to the President.

• No “Prague Spring” after 2017 as Ramaphosa will need time to tighten his grip on power,

making only gradual policy and implementation change likely.

• Policy decisions on state intervention in the economy remain highly politicised and subject

to heavy NEC direction, but social services and delivery improve slowly.

Scenario 2: The Sitting Duck: “Delayed Change”

The way these drivers interact could lead to one or a a hybrid of future scenarios (3)

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• ANC haemorrhages middle-class and urban black support, with a protest-ridden election

campaign failing to return many election candidates to office.

• Spurned ex-local government councillors and 2019 election hopefuls help swing

constituencies toward supporting Deputy President Ramphosa as the alternative.

• Sentiment against President Zuma in the tripartite alliance escalates through a series of

dynamic moments and he is either recalled in line with the 2008 precedent or adopts a de jure role in favour of Deputy President Ramaphosa becoming the de facto leader of the country.

• A “Prague Spring” follows until the (re)constitution of a Ramaphosa government after the

election.

• Chances appear good for a return to fiscal discipline and more productive spending.

Municipalities perform well as opposition parties seek to prove themselves, while the ANC makes social welfare and education the cornerstones of its bids to improve life for the poor.

Scenario 3: The Figurehead: “Quick Change”

Options for the business community and external institutions

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Implementation and policy inertia is likely to continue in substantially the same way until at least the installation of a new government in 2019, unless President Zuma adopts a de jure role in favour of a Deputy President with a strong mandate acting as the de facto President.

Business leadership through open policy contestation

Consensus built from outside in by dynamic demonstration of policy consequences

Immediate Term: Key SONA Take-Outs on Approach to the Economy

SONA: Lost Opportunity or Signs of Better Times to Come? 4 Alarm Bells

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Recurring emphasis

• n ever elusive

common narrative between business, government and labour InvestSA/One-stop Shop approach Implementation of PRC Report on SOE’s under Dep Pres good, but speech suggests President hesitant to address capture

• f SOE’s directly

No tough fiscal consolidation prioritised

• NEDLAC agreement

to reduce strikes & violence

• Phakisas
• Mining Industry

task team Leader’s Declaration to save jobs

• Again under IMC
• Replacement of

boards

• Partial or full

privatisation of SOE’s

• Replacing

unqualified executives

• Expedited EIA’s and
• ther approvals yet

to emerge

• RIA’s gathering

dust

• Policy uncertainty

in mining, tourism. Land reform and energy

• Cost-cutting

measures symbolic

• Drought relief not

touched upon

• #FeesMustFall

ignored

Slogan Central: Little progress on Government’s 9-point plan on the economy

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1.) Resolving the energy challenge; 2.) Revitalising the agricultural value chain; 3.) Beneficiation through adding value to mineral resources; 4.) More effective implementation of higher impact industrial policy action plan; 5.) Encouraging private sector investment; 6.) Moderating work place conflict; 7.) Unlocking the potential of SMMEs, cooperatives, townships and rural enterprises; 8.) Reform of state owned companies, broad band roll out, water sanitation and transport infrastructure; and, 9.) Operation Phakisa, which aims to grow the ocean economy - such as the shipping and storage of energy products.

Conclusions & Recommendations

5 Key Conclusions

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1. Quick, wide-ranging capitulations in key areas has President Zuma too weakened to anoint his successor at this point, but could change depending on ANC’s performance in LGE. 2. Whilst there are some big events on the road to the 2019 election, the road to greater policy certainty and more open policy contestation is likely to be an iterative one, at least until December 2017 3. Unless a dynamic moment of the gravity of Nenegate precipitates an earlier change, President Zuma is likely to remain President of SA until after the ANC elective conference of December 2017; as a increasingly de jure or a figurehead President, possibly until the election in 2019. 4. Fiscal consolidation and some symbolic concessions to investor friendliness likely in the immediate term, but structural reforms supporting long-term growth will be slow to emerge until at least December 2017, and possibly, until the election in 2019 5. Much bigger opportunity for tripartite alliance constituencies to coalesce on an issue-based, rather than materially motivated agenda, which could bring much greater policy certainty and predictability starting Dec 2017 to 2019.

Building trust between business and government: key messages, actions and reform options

19 1.) Dynamically illustrate to the ANC how private sector investment in the economy is being crowded out, and what the solutions are to encourage such investment instead; 2.) Make the message “land” emphatically that the private sector desires to be a part of the solution (“come to the party”) to reduce poverty, ameliorate inequality and decrease joblessness; and, 3.) Constructively, and in term of specific solutions, convey to government how to create a more conducive investment environment. 4.) Explore options to reform social dialogue institutions to better support high levels of consent that would promote political and economic stability in the economy. 5.) Integrate with the rest of Africa, expand exports of South African manufactured goods and leverage initiatives such as the pending Tripartite Freed Trade Area between the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC) 6.) Expand the domestic market through the localisation of procurement, supplier development, leveraging the competitive rand to compete better against imports, meeting the market needs of social grants recipients, better leveraging institutions of innovation and learning through entrepreneurial skill. 7.) Teach working skills to university graduates to improve their absorption into the job market.

Thank you

For Questions or Queries Please Contact: Coenraad Bezuidenhout Managing Director: Public Affairs / Strategic Communications +27 82 074 9692 mobile +27 11 214 2421 direct +27 11 214 2400 reception coenraad.bezuidenhout@fticonsulting.com