By Carol Paton

Zuma has kept his ideology close to his chest in his campaign for the leadership of the ANC. That has hidden the nature of the man from public scrutiny. The FM delves into who he is and what impact he could have on SA.

Jacob Zuma says nothing will change on the policy front should he come to power. Don’t be convinced.

Investors, to whom he has spoken, seem seduced. Speaking at a lunch at Merrill Lynch in Johannesburg last month, Zuma said he thought national treasury and the finance minister had done a good job and “he wouldn’t tamper with that”, says a senior officer at the bank.

Zuma’s team has been on message: government economic policy is ANC policy and the president doesn’t have the ability to change it, only “determine the style in which it is implemented”.

“He dispelled some of the views that he is an ogre. People left feeling much more relaxed about how the succession would play out,” says the Merrill source.

How likely is it that nothing will change?

Zuma sticks to generalities when speaking to business – behind closed doors and out of earshot of the ANC and Cosatu members rallying to elect him.

He doesn’t grant press interviews at all on issues related to the ANC succession, especially not on economic policy. But the FM has on several occasions interviewed advisers to Zuma, particularly those it believes will be key to future policy.

During these discussions it has become clear that a great many things are up for discussion and that many could change.

The first is the budget surplus.

Last month, finance minister Trevor Manuel made a policy decision to run a budget surplus – at least for the next few years. A precaution, he said, against uncertainties in the international economy, which could result in next year being a tough one. A budget surplus will help avoid a “boom and bust” cycle – if commodity prices fall or portfolio investment declines for any reason, then the shock to the SA economy won’t be quite as sharp.

But Cosatu has been a strong critic of the budget surplus, arguing that given the scope of SA’s developmental needs, government should be spending more and borrowing more to fund it.

Says a Zuma adviser : “An enormous [budget] surplus is building up. The question is how do you use that surplus in a way that allows for the unleashing of the economy. It goes not to changing the fundamentals, but in discussing how you use those surpluses in a creative way, in a partnership with civil society.”

One way of using the cash, says the adviser, would be to improve infrastructure at a local level – connecting towns and connecting these in turn to ports. The important point would be that any decision would be preceded by a process of social dialogue in which all stakeholders would be able to have their say.

That decisions like this are, under the Mbeki-Manuel regime, made by national treasury is considered particularly irksome. “The national treasury is prescribing how the resources are collected and how they are used. We need to open that debate; if they can convince everyone else that they are correct, then that’s fine.”

Prudence has been the hallmark of Mbeki and Manuel’s management of the economy. Some in business fear that, under Zuma, prudence will be the first thing to disappear.

Businesspeople are cautious of getting involved in politics, putting their thoughts on record. Some, like ANC national executive committee member Saki Macozoma, warn that it’s “unwise for business to demonise Zuma” as, should he be elected, business should show respect for the democratic outcome. But among others there are serious concerns over a Zuma presidency.

One business leader says: “The current account is running a large deficit; the performance of the domestic economy is running into trouble and the international environment has become much shakier. Manuel has correctly been even more prudent. But I have a feeling that with Zuma, prudence will be out the window.”

The current account deficit – primarily made up of the difference between the value of what SA exports and imports – is an issue over which there is concern. At present, the deficit is covered by a surplus on the capital account – foreign currency flowing into SA’s capital markets. But should there be a drop in the amount of portfolio inflows, or even a switch to net outflows as foreign investors withdraw their funds, the result would be a fall in the value of the rand. The degree of downward pressure will depend on how much foreign investors panic. But with the extent of the current account deficit, SA is particularly vulnerable.

The prospect of a Zuma presidency is one risk that may trigger capital flight. The FM spoke to a range of international fund managers to gauge their views.

A few had encountered Zuma through his meetings with international bankers. Says one: “He put his best foot forward but the fact is he has a much more radical power base than Mbeki… It’s not so much whether the markets will vote against Zuma, it’s whether they will vote for him to the tune of R2,5bn/ week. A wait-and-see attitude from the markets is more likely.” This amount is the value of the capital inflows SA needs to fund its current account deficit.

“The market might not react immediately but questions are being asked. As soon as he starts to appoint people regarded as problematic, the global market cop will move relentlessly without any sentiment,” says another business leader.

Political risk is only one factor driving international portfolio decisions. But it’s one foreign investors watch carefully.

The second area of economic policy to be put up for debate is inflation targeting, says one of Zuma’s advisers. This is the central pillar of monetary policy: to use interest rates to keep inflation within a target range. But critics on the Left have often accused the policy of damaging growth, arguing that high interest rates strangle the economy and cost jobs.

“The SA Reserve Bank and national treasury are wedded to the notion of inflation targeting. But is it producing the kind of growth we want? If not, we should revisit it,” he says.

The way to “revisit” it would again be through dialogue. But such a step is risky. Inflation targeting works by managing inflationary expectations. Because SA believes government and the monetary authorities are completely committed to the policy, price and wage negotiations are guided by it. Policy credibility is key. Even the possibility of revisiting inflation targeting will damage it. And foreign investors are naturally concerned about the real value of their assets in SA.

This seems to be the approach a Zuma government will take to many controversial or unpopular policies: put them up for discussion and hope the best solution prevails. But there seems little recognition that even such debates could be damaging. Zuma, himself would not necessarily hope that the most radical perspective wins such debates.

He made a similar suggestion regarding the death penalty while speaking in Mitchells Plain, Cape Town, last week, the heartland of conservatism. “If people feel they are not happy with it, a way should be found… The people themselves must voice their views about the matter. If the population is not happy, then let the population tell us what needs to be done.”

It’s not the corruption and rape charges that investors and SA business think about when they think of Zuma, though SA analysts in London or New York are well aware of these, it’s the simple fact that he has a far more radical support base than Mbeki. So who Zuma appoints to key positions in government will be very important.

Says the business leader quoted above: “You have to be idiotic to think he won’t appoint SACP or Cosatu members to key positions.”

It’s the ministry of finance that business worries about most of all. Would Manuel be first choice for finance minister? “The problem I have with Manuel is: would he be willing to rise to the new challenge, beyond that of macro economic stability? We don’t want whenwe s’ who say, when we did this before…’, but there is nothing to indicate that he won’t.”

The presidency – also vital in the engine room of government – is certain to change its personnel. Like Mbeki, the Zuma team would like to see the presidency as a power house, especially as a centre from which the rest of government is monitored and evaluated. This is similar to Mbeki’s approach, which saw the establishment of a policy & advisory services unit, headed by ANC ideologue and strategist Joel Netshitenzhe. But while Netshitenzhe is smart and appointed some smart economists and development experts, nobody knows what Zuma will do. The people closest to him (see previous page), though consummate politicians, are not of a similar calibre.

On the other hand, there is an argument that says Zuma and whoever he appoints will be “straitjacketed” by the market and not able to do much.

“There will be a lot of stylistic change but, quite frankly, even if [Cosatu general secretary Zwelinzima] Vavi comes to power, not a lot will change,” says Iraj Abedian, an economist and frequent consultant to government.

Zuma, though, will come to power on a ticket for popular change. As much as the global market cop hammers him for stepping out of line, his power base will be pushing for change.

Though he may be able to hold the line on monetary policy, the pressure for greater spending is going to be enormous. It is in changing social policies that Zuma is likely to think a difference can be made.

Already he has said education should be free. It might not break the bank, but it is not the solution to the real problem of education: its poor quality. Addressing that requires difficult negotiations with teachers’ unions, for which Mbeki did not have the stomach. Zuma’s support for free education is easy populism.

The approach to economic development espoused by Zuma’s adviser sounds most naive of all. The budget surplus could be used to build infrastructure so that “every town is connected to every other town and every town to a port”, he says. The notion that economic growth will follow infrastructure investments wherever they are is one on which government has already come full circle. Now, with the National Spatial Development Perspective, a presidency strategy, the development approach is that public investments are made on the basis of expected returns. This ensures maximum bang for government buck.

To make any of the changes discussed, ANC policy would not need to be changed. Official ANC policy is sufficiently broad for a shift of emphasis to have a significant impact. Mbeki’s two terms as president have made that point extremely clear. Without abandoning ANC policy, Mbeki took the party down an economic policy road of reform that – particularly at first and possibly still – isn’t reflective of the majority view within the ANC.

In summary, what Zuma is saying is that he will be looking for consensus in policy-making. “We want an engagement and through it we may come to a road map,” says the adviser.

The search for consensus and deal-making on economic policy is a well-travelled road in SA. Job summits, growth summits and the National Economic & Development Council (Nedlac) – through which all economic policy must pass before it reaches parliament – are all precursors to the consultative approach that Zuma dreams of.

But on all of these occasions, consensus and progress have usually been elusive. The chances that the Left would be more open to compromise seem slim now that it senses its proximity to state power.