On South Africa and the ANC

On Monday morning, it seemed as if the long leadership/personal battle between ANC factions had been settled. South Africa's dominant political party, led by supporters of Jacob Zuma, succeeded in forcing the resignation of President Thabo Mbeki, the man who has run the country since Nelson Mandela left office in 1999. Jacob Zuma would almost certainly assume the presidency in 2009, after a brief care-taker run by Kgalema Motlanthe, deputy leader of the ANC and Zuma loyalist.

By Tuesday afternoon, the country was in the midst of a full-scale political crisis (and possibly on the brink of a financial crisis). 14 ministers resigned over the manner of Mbeki's ousting, including Trevor Manuel, the world-respected finance minister who is widely credited with South Africa's macroeconomic success. So spooked were the markets by Manuel's reported departure, that the Rand sank 3% in less than an hour. When Manuel's press secretary publicly stated his willingness to serve on, the Rand bounced back. But the shock of his departure illustrated just how unstable South Africa's macro success is. It also signalled a period of political instability in Africa's largest economy.

The ANC has dominated South Africa's political scene since the fall of apartheid. Under Mbeki's leadership (which to many extends back well into Mandela's presidency- Mbeki essentially ran the economy as Mandela's deputy), the party embraced liberal macro policies and fiscal discipline. Manuel's stewardship of the economy isolated the influence of the trade unions and old revolutionary communists that dominate the ANC's rank and file, satisfying foreign investors and an emergent (but tiny) black middle class.

But Mbeki's ANC has always been an uneasy alliance. Zuma's resurgence has been driven by a revolt of sorts by the trade unions and rural base. He carries the torch for the old school ANC, concerned with equity and workers rights rather than macro stability and foreign capital. Mbeki and his liberal policies had become so detached/isolated within the ANC, that his ousting was probably inevitable. While he was playing peace-maker in Zimbabwe, Zuma loyalists were orchestrating his demise. Unless the legal proceedings against Zuma return with a sense of legitimacy, he will assume the presidency next year, and the party base will expect a return to the ideological roots of the revolutionary years.

Zuma will have to be attendant to the interests responsible for his rise to the presidency. They want greater spending (difficult given ZA's already troubling deficits and reliance on foreign capital), a renewed focus on jobs and equity (desperately needed), and the abandonment of an inflation-targeting monetary policy (potentially disastrous). But few doubt he will fully reverse Mbeki/Manuel's macroeconomic policies. Zuma himself has been at pains to assure foreign investors and business leaders of his commitment to austerity and monetary discipline.

The real risk to South Africa is a political split within the ANC. This is more likely than it was last fall, when the party seemed united behind Zuma. While woefully unpopular, Mbeki's ousting reeked of revenge and opportunism, and the resentment over this spread beyond the former president's allies. Archbishop Desmond Tutu (Nobel laureate and South Africa's moral authority) was widely quoted as warning, "The way of retribution leads to a banana republic". The mass resignation of ministers was largely protocol (and a show of loyalty to Mbeki), but the former president's allies are unlikely to passively fall in line behind Zuma.

More importantly, the ideological split that has festered beneath the surface of the ANC has now burst into the open. This may be harder to reconcile than old grudges.

Whatever the ultimate outcome of this leadership struggle, South Africa's post-apartheid stability is in real trouble.