Head of capital markets Peter Attard Montalto joins 702‘s the Money show, with Bruce Whitfield, to discuss the future of the ANC and why the status quo need to change.

“So, at the start of the year the markets were looking for a reformist top 6 or a reformist MEC. That is not going to happen. There is no indication of that from the people that are running – from the composition of the MEC nominations. I think we’re largely going to see status quo in terms of an MEC that is not particularly policy wonkish, can’t take those long-term policy trade-offs. We’re going to see Ramaphosa re-elected but battling a more mixed top 6 and a more mixed MEC as well.”

Listen to the clip below.

The road beyond the status quo appears to be unacceptably daunting for far too many people.

The dawning reality is that things are not quite as they seemed and that risks previously assumed to be way out in the tail or able to be brushed under the carpet are now looming large.

A lack of succession planning or explanation of what comes after, and why, has left markets and investors scratching their heads. Whatever comes next within the ANC could be worse, perhaps even dramatically so.

Fear compounds the downside risks — even if the baseline is that President Cyril Ramaphosa will continue for now — which is of little use  when sentiment is already so weak.

Similarly, the rush by some in business to praise the potential continuity of other options belies considered and objective analysis. The most interesting thing about Paul Mashatile is precisely that he is not continuity.

The current emotional state harks back to 2017, though back then there was no other option.

SA knows its problems and it knows the answer. The blockages are ultimately political. SA needs a fundamental political realignment of its broad body politic — politicians and electorate as well as media and the rest of the ecosystem — and that includes the ANC internally and its outside relationships.

The “blow up everything now” view in 2017 was that a Nkosazana Dlamini-Zuma presidency would have forced a realignment so much quicker than the two steps forward and one-and-a-half steps back that was to result. We can consider what will minimise inequality and unemployment over the next five years, or we can ponder what will sustainably solve such crises over the next 30 years. Until the country has gone through the political and economic “bottom” there will not be salvation. Neither of those has been reached yet.

Looking back, things undoubtedly would have been worse under alternatives to the status quo. Yet the status quo can prevent the emergence of solutions required as people are lulled into a false sense of security. This is what lingered after the initial Ramaphoria died towards the end of 2018 — and only dissipated more recently amid the metro coalition dramas and cash-in-sofa-gate.

The realignment of the body politic is something that many minds, including business, seems to assume is a distant externality that happens of its own accord. That is quite wrong. It is a product of so many internal forces (not just load-shedding but also the lack of service delivery and poor recovery from crises), and has active participation from individuals across all parts of society.

The components of the realignment are probably not even fully in view yet, and they don’t necessarily disregard the ANC or necessarily imply the current opposition. The aim of this realignment must be to allow the space within which political leadership can emerge that marshals solutions to the country’s complex and intertwined problems.

The recent failure of all bids for wind power in the Renewable Independent Power Producer Programme (REIPPP) bid window 6 process is a timely reminder that the end of power cuts — let alone navigating a successful Just Energy Transition — is still a long way off.

Having 3.2GW of unallocated slots for wind wasn’t expected, but what we are seeing is expected themes and blockages play out on steroids. Put simply, there was no grid to connect these projects (in the Eastern Cape and the Western Cape) because spare grid capacity that was shown by Eskom at the time of bidding in the two provinces (about 3.8GW) had subsequently (legally and by the rules) been taken instead by private off-taker projects that could reserve the grid space faster than the cumbersome REIPPP bids.

A lot of questions emerge about the system for grid access and the readiness of private projects to connect in a reasonable time. However, the core problem is that the urgent need for transmission grid expansion — which Eskom and the private sector have been saying with increasing alarm — has simply never been taken by the scruff of the neck and driven forward. As such, the Northern, Western and Eastern Cape are now full and, given the current pace of transition, will remain so until well into 2027 or beyond.

How then do we move forward with bid windows 6.5 and 7 and the 6GW of renewables and 1GW of batteries that the country needs to procure every year? Institutions such as a properly independent National Transmission Company are still not there to support and fund the investment needed in the grid.

Deep change is clearly needed, including political and leadership change at the departments of mineral resources & energy and public enterprises, and in the broader politics that can see these challenges and the need for solutions as central to the country’s needs and not as a peripheral debate.

This is but one problem that demonstrates the risks when the road runs out: there is now no more grid access in key areas for the foreseeable future. The implication is more load-shedding for longer than previously assumed. Ironically, that might force a faster pace of political realignment.

The new year will be especially interesting because all the components to solve the problems will be on the table and whoever is in power (before more dramatic upsets in 2024?) will have a brief and narrow window to bed down a few limited changes. The choices — such as the new Electricity Regulation Act Amendment Bill, which will support solving the transmission problems — will be crucial.

Yet the complex web of electricity reforms required highlights this issue: neither blindly hanging on to the political status quo or assuming that what comes next is more of the same will solve the problem when you have run out of road.

 Attard Montalto leads on markets, political economy and the just energy transition at Intellidex, an SA research-led consulting company. This article first appeared in Business Day.

Intellidex’s Head of capital markets, Peter Attard Montalto, joins eNCA’s The Money Desk with Devan Murugan to discuss the volatility of the markets in response to the outcome of the Phala phala panel and reports of President Cyril Ramaphosa’s possible resignation.

“The real question on my mind is: how does he (Cyril Ramaphosa) stay or what does he have to give up or sell if he’d like to stay? Does he go mad on coal perhaps? I don’t think that will happen but that is the kind of question that isn’t really being debated. I think if he really wants to stay, he could stay by giving up various things on policy, on cabinet positions etc.,” says Peter Attard Montalto.

Watch the full interview below.

Is it possible to write about anything other than the Phala Phala scandal? Particularly on pages that are meant to make sense of financial markets? I have tried, dear reader, but failed. The fact is that the past few days have been the most meaningful for SA markets in years.

Thursday was a bruising day for those invested in SA debt or equities. As rumours began circulating that the president was about to resign, there was panic. Investors came to a stark view: in the absence of Cyril Ramaphosa the steps SA has taken to repair its institutions and improve its finances suddenly become very shaky. His immediate successor would be David Mabuza, who constitutionally must step into the presidency and about whom all that is known is that he spends a lot of time in Russia (at least once courtesy of the Gupta jet) and has umpteen dark clouds hanging over him from his long spell as premier of Mpumalanga.

(Ironically, Mabuza also found himself caught up in a farmhouse burglary of cash back in 2009. The Mail and Guardian quoted sources at the time that only R4m was reported to police as having been stolen, rather than the R14m real amount “because it would have raised eyebrows that the premier kept such a large amount of money at a residential property”. Clearly, farmhouses and cash go with the territory.)

Given Mabuza’s position is the result of awkward trade-offs at the 2017 Nasrec elective conference, the national executive committee would then “recall” Mabuza and appoint a new president and deputy president, at least on an interim basis. But who? Apparently calls were made to Kgalema Motlanthe, who so ably filled the role in the Mbeki to Zuma interregnum. But he said “no”, quite apart from the practical challenge that he is not even an MP.

Other names floated included Thandi Modise (who has her own farm-related embarrassments involving starving animals) or those who have received some branch support going into the ANC’s elective conference, particularly Zweli Mkhize (who has many skeletons, most recently over procurement corruption during Covid-19) or Paul Mashatile (relatively scandal-free).

All these options are unnerving for the markets. SA has been repriced by global investors thanks to improvements in fiscal management, the taming of the debt spiral we were in at the end of the Zuma years, and material advances in structural reforms such as allowing the private sector to generate electricity at scale. Just one recent indicator came from ratings agency S&P Global, which affirmed SA’s debt ratings and has SA on a positive outlook.

Confidence has also been recovering in the criminal justice system, which now seems capable of pursuing state capture miscreants, even though various police services are still a long way from fully functional. Markets were banking on this trajectory continuing, delivering further structural reforms to unlock the potential of the economy and improvements in the rule of law.

All that progress was perceived to be at risk. The biggest losers on the equity markets were the banks, with share prices punished 5%-10% on Thursday. Banks had been performing well thanks to higher interest rates which have improved margins, but they are heavily exposed to disruptions in the bond markets and the value of government debt, so the spectre of a reversal of the trend in government finances is negative. Plus, they ultimately depend on wider economic growth to drive their revenue. Equities were helped by mining and other rand hedge stocks that rallied thanks to the 4% plummet in the rand, but that rand fall came with the whooshing sound of capital leaving SA bond markets, which fell about 5%.

There was some recovery on Friday, though not fully. Markets must now try find a new level for SA assets. As it stands, the concern will be that the president is weakened, more vulnerable to attack by unsavoury political opponents. That means the reform agenda is less reliable. But all crises have elements of reflexivity, like how an immune system becomes stronger after an illness. This crisis has made it clear that Ramaphosa is vulnerable, but also that there is no alternative. But it has become clear that the reform effort cannot be invested in just one man.

It really does matter who else is available for leadership and whether institutions can be trusted to deliver reform, rather than personalities. There has also been some weakness exposed in Ramaphosa’s opponents. They had the opportunity to strike, but they hesitated, glimpsing that at best they would get a get-out-of-jail-free card but with only chaos to live in.

SA has lost some of its investor attractiveness. But there is a path open to provide more robust assurance that SA is ultimately protected by its institutions rather than the personalities in charge. We now must make that true.

• Theobald is chair of research-led consulting house Intellidex. This article first appeared in Business Day.