By Cees Bruggemans

A Zuma Presidency could surprise with some remarkably positive outcomes during its period of office.

Here follows a modest attempt at short-listing a few obvious outcomes to look out for, this in addition to any gains or losses from new policy emphasis, direction or efforts.

Given popular demand, Mr Zuma could conceivably be a two-term President, taking him potentially to 2019.

But Mr Zuma apparently indicated before winning the presidency that he only aspires to one presidential term, potentially wishing to bow out in 2014. Were he to do so, he would be following in Mr Mandela’s footsteps.

There is already in place a safe pair of proven hands in the form of Deputy-President Motlanthe to whom to pass the reigns in 2014. And if not him, there apparently are many more such potential torchbearers able and willing. Thus the Zuma legacy could potentially extent at least to 2019 and even beyond.

What could stand out about the Zuma era at the end of the 2010s, a mere decade from now, when looking back in time, besides the many things we hear about daily?

Besides potentially ceding power early while still loved rather than late when overdue, and thereafter going on to become a cherished elder statesman, Mr Zuma is starting his first term at the absolute global low point of the Greatest Recession since the Great Depression.

Few could improve on such timing. For like in Bill Clinton’s case, who took over as the Bush recession was ending in 1992 and thereafter witnessed one of the longest economic expansions in the 20th century, Mr Zuma may find himself the beneficiary of a similar phenomenon.

The world economy is starting its next cycle heavily repressed and probably with only a gradual ascent, taking time to build momentum and reaching a new peak crescendo. Provided nothing malfunctions, this could again become a long expansion, given substantial resource slack on call.

With China especially likely to be a star performer in the coming global expansion, commodity exporters should also again be riding high eventually.

This promises an early easing of our balance of payments constraint, and a return to potential growth of at least 3.5% annually, and possibly somewhat more for the middle and latter parts of the journey.

Even so, overachievement will probably be limited by a somewhat restrained consumer sector, more disciplined banks, a less accommodating monetary policy given an early return of commodity inflation, and a restraining fiscal policy determined to reduce its budget deficit.

When allowing for catch-up from our current recessionary underperformance, real GDP will probably again expand by some 40%-50% in the coming decade.

Given a modest increase in population from 48 million today to 50 million or so then, plus an uncertain net immigration tally, this suggests a gain of some 30%-40% per capita over the period.

This compares with a 47% expansion in real GDP, a 55% increase in real household disposable income and 26% gain in real per capita income in the 1998-2008 decade.

The main difference for the coming decade will hopefully be that it will be more fixed investment-led with consumption gains traveling economy class in the caboose (rather than the other way around as in the past decade).

This past decade was of course book-ended by the Asian Contagion disruption at its beginning and the global banking and credit crisis at its end holding things back, but with an enormous Chinese advance and accompanying commodity and capital flow windfall in between these crises driving our overall performance.

Replicating all that precisely would be tricky, of course, as history never repeats itself exactly, even if the past and next decade look remarkably like the two halves of a spirited world cup soccer final. Certainly some elements (a crisis beginning and a renewed Chinese boom eventually favouring us for most of the coming decade) may well again be there.

The national income gains in the coming decade will of course again be unevenly shared, but there will also be fundamental structural changes.

This should include good job growth and significant real income gains in the productive parts of society.

In contrast, at the lower end of the income scale we are unlikely to quite repeat the four-fold increase in welfare recipients from 3 to 13 million of the past decade. Even so, welfare numbers haven’t stopped rising yet (think of 15-20 million territory eventually), and especially their scale of benefits could still expand happily along with a richer growing country, just as in its West European model of old.

Formal employment will probably increase by 2%-3% annually through 2019. Even when allowing for the present job losses, the overall job gain will probably be some 2.5 million for the decade, taking formal employment from 9.5 million today to 12 million then.

With the white population demographically stagnant (though losing young people to emigration), the entire increase in net new employment this coming decade could accrue to Indian, Coloured and especially Black people.

Informal employment should also grow, with its non-farm component probably doing 3%-4% annually through 2019. Even with its farm component relatively unchanged, its overall job gain may be some 1.5 million for the decade, taking informal employment from about 4.5 million today to some 6 million then.

Thus the ranks of the middle and working classes are set to expand further, increasing their relative weightings in the labour force as unemployment gradually reduces while also changing the ethnic composition of these social classes. This aside of any politically inspired social engineering still making a mark.

Another important reality will be urbanization. South Africa is currently about 50% urbanized, but in a growing economy this should still steadily increase further.

If the urban areas were to keep expanding at 3%-4% annually, another ten million people can be expected to urbanise this coming decade. In the process they will bolster the growth process, making their labour available for more productive use compared to their rural origins, and boost market size for many products and services.

The Zuma Era will also inherit the fruit of the great infrastructure efforts of these years. Not only will we host a soccer world cup, but some of us will be riding Gautrain and the modernized taxi fleet. We will also improve our electricity supply buffer and modernize and expand our road network, ports and airports.

Taken together, huge national income gains, expansion of the middle and working classes and of the regional urban concentrations and a greatly expanded infrastructure won’t be small gains compared to recent times.

To this can probably be added a radically changed situation in Zimbabwe as Bob’s legacy gradually gives way to renewed public sanity in that tortured country, importantly assisted by South Africa and the outside world through aid, trade and investment.

Source: Cees Bruggemans, FNB, May 18, 2009.

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