BIG BUSINESS PLEASED WITH ZUMA BUT UNCERTAIN OF

C O N F I D E N T I A L PRETORIA 001739


E.O. 12958: DECL: 08/26/2019
TAGS: ECON PGOV SF
SUBJECT: BIG BUSINESS PLEASED WITH ZUMA BUT UNCERTAIN OF
THE FUTURE

Classified By: Economic Counselor Terri Robl, reasons 1.4 (b) and (d)


1. (C) Summary: South Africa's business community believes
that Jacob Zuma has put together a good team of economic
ministers, according to Business Unity South Africa (BUSA).
Business is also gratified that the new government is
accessible and eager to get input from business. However,
BUSA sees commitments made at the ANC's December 2007
conference as unrealistic in the current economic climate.
The contradiction between fiscal discipline and "Polokwane
pressure" could cause tension within the ANC and lead to
longer-term fiscal slippage. End Summary.

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The Early News is Good...
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2. (C) The South African business community is pleased with
Jacob Zuma's first months in office, but executives are still
uncertain about the long-term direction of policy, according
to Raymond Parsons, the Deputy CEO of Business Unity South
Africa (BUSA),the country's premier big business
organization. Parsons met with Deputy Econ Counselor and
Econ Specialist on August 25 in Johannesburg.


3. (C) Parsons cited a long list of Zuma decisions that were
welcomed by BUSA and its members. These decision included:

-- The appointment of "pragmatic technocrats" to most of the
economic ministries. "Zuma has put together a good economic
team," Parsons said, citing Finance Minister Pravin Gordhan
and Trade and Industry Minister Rob Davies in particular.

-- The selection of Gill Marcus as governor of the South
African Reserve Bank (SARB). Parsons told us that Marcus has
a "brilliant CV" reflecting prior service in parliament,
National Treasury, the SARB, and the private sector. He
speculated that SARB might take a "more nuanced" approach to
inflation-targeting under Marcus, but he expressed doubt she
would support abandonment of the policy altogether, as some
ANC allies have demanded. He noted that Marcus was involved
in the design and implementation of the inflation-targeting
policy during her years at Treasury and SARB. (Note:
Parsons sits on the SARB board.)

-- Tapping Trevor Manuel as head of the National Planning
Commission. While acknowledging the Commission's role is
still unclear, Parsons was confident Manuel would play a
central role in coordinating policy and giving strategic
direction to the government.

Parsons also said that "the new government is listening to
business. They seem eager to get our inputs." He told us
that BUSA is holding one-on-one meetings with all of the
economic ministers, and the group will meet with Zuma himself
in the near future.

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...But Question Marks Remain
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4. (C) While pleased with Zuma's performance to date,
Parsons admitted that "smart businessmen are still watching
and waiting." "The jury is still out," he claimed.


5. (C) In particular, Parsons was worried that social and
economic commitments made at the ANC's 2007 Polokwane
conference are "unaffordable and unrealistic" in the current
climate of recession and large deficits. (He cited national
health care as an example.) Parsons expressed confidence
that cabinet members appreciate how sharply the fiscal
picture has deteriorated since 2007, if only because Finance
Minister Gordhan "reminds them of it at every opportunity."
However, the BUSA official warned that "many in the ANC still
don't get the message -- and this will create tension" as ANC
members look to Zuma to "deliver on Polokwane." Parsons did
not rule out that "Polokwane pressures" could lead to fiscal
slippage, which would undermine SAG credit and eat up
resources better used on infrastructure and other productive
assets.


6. (C) Parsons appeared exasperated that cabinet officials
such as Higher Education Minister Blade Nzimande and Deputy
Transport Minister Jeremy Cronin, both members of the South
African Communist Party (SACP),have called on parastatals to
play a larger role in development. He exclaimed, "It's
bizarre. Everyone talks about state incapacity, but in the
next breath they want the state to do more."

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Comment
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7. (C) Parsons' views are now commonplace in business
circles, where Zuma gets high marks for his cabinet but
worries linger that sound policy could be undermined by
alliance politics. Parsons is right to be concerned that
pressure to "deliver" on jobs and social services might be
unrealistic and could erode fiscal discipline. In weighing
his words, however, it is good to remember that white big
business in South Africa remains distrustful of the ANC and
suspicious of its capacity to govern. A wave of anxiety
swept through corporate suites when Zuma became ANC President
in 2007. Having grown comfortable with the economic
stewardship of Thabo Mbeki, many executives viewed the new
ANC leader as corrupt, poorly-educated, and beholden to labor
federation COSATU and the SACP. Compared to 2007, the view
of Zuma today is almost upbeat.


GIPS