The Alliance Summit is the business

The Alliance Summit on the weekend has significantly reduced confusion about policy and risk – although monetary policy is still under review.

Background

1. “The Alliance”  met at Esselen Park, Ekurhuleni  this weekend.
2. This meeting consisted of the the African National Congress (ANC), the South African Communist Party (SACP), the Congress of South African Trade Unions (COSATU), and the South African National Civic Association (SANCO).
3. According to a joint communique press release the summit was to be “attended by the ANC National Executive Committee, led by its President, cde Jacob Zuma, the Central Committee of the SACP, led by its General Secretary, cde Blade Nzimande, the Central Executive Committee of COSATU, led by its General Secretary, cde Zwelinzima Vavi, and lastly, SANCO National Executive Committee, led by its President cde Ruth Bhengu.”

Rumours

The big rumour was that Gwede Mantashe  attempted to achieve acceptance that “The Alliance” and not “The ANC” should be the centre of policy making – I doubt this, but it is what the Sunday papers were saying.  The same rumour claims that Julius Malema led the charge of ANC traditionalists against this sacrilege ….. difficult to tell if it is true (Mantashe said the story was cooked up) but it gives an interesting twist to the ongoing rehabilitation of the ANC Youth League president.

Reports

1. Cosatu and the SACP lost the battle around Trevor Manuel and the NPC. The National Planning Commission, located in the presidency and headed by Trevor Manuel but also consisting of a panel of independent experts and charged with the responsibility for integrated strategic planning across government is now a fait accompli. This is how Trevor Manuel conceived of his mandate in the Green Paper and it seems Trevor Manuel and the ANC have won the day against Cosatu and SACP criticism.
2. There was a strong indication that the ANC had agreed to re-examine the South African Reserve Bank mandate. Mantashe  announced after the summit that they had discussed “how best the Reserve Bank should talk to the development priorities of the state …. The summit agreed that the alliance task team on macroeconomic policy must remain seized with reviewing and broadening the mandate of the Reserve Bank.” This is carefully phrased and is unlikely to panic the markets – but risks remain and financial markets and sovereign risk agencies will be watching this space.
3. The summit clearly opposed the electricity hikes proposed by Eskom: “We are totally uncomfortable with the 45 percent increase. The summit also noted with concern that the successive tariff increase requests through the multi-year price determination by Eskom will negatively impact on society, the economy and jobs. The summit therefore supported efforts to have the tariff increases minimised,” said Gwede Mantashe in the post Summit interview.  This is likely to be popular with almost every constituency – except for those who believe that Eskom is best left to manage its own affairs …. not a significant demographic at this stage of proceedings.

The bottom line

The ANC has usefully asserted its authority.

The idea that “The Alliance” could or should determine details of government policy was becoming deeply disturbing and untenable. This is not only because of the policies espoused by Cosatu and the SACP are generally seen by investors and businesses as hostile, but also because there appeared to be no centre to policy making, and therefore no predictability – and therefore a serious risk overhang.

In an environment where policy making has no centre we started to hear the worst and most self-interested voices raised bombastically and claiming authority. The Alliance Summit went some way towards increasing investors ability to dismiss the noise.