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The South African IMF's hopes for rescue are shaken when Zuma loyalists resist

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President Cyril Ramaphosa during a breakfast briefing outside the World Economic Forum on January 18, 2018 in Johannesburg, South Africa.

Moeletsi Mabe | Sunday Times | Gallo Images | Getty Images

South Africa now has less than a 33% chance of receiving a rescue package for the IMF (International Monetary Fund) for new research projects this year.

After the IMF had received US $ 4.3 billion in emergency funding so far in 2020, the momentum towards a much-touted and far-reaching rescue package seems to have slackened in recent weeks.

The country is embarking on an ambitious economic reform agenda in hopes of stabilizing a mounting debt profile while trying to fuel an economic recovery from the sharp downturn caused by the coronavirus pandemic.

"ANC hardliners and allies of former President Jacob Zuma are still firmly opposed to an IMF deal," said David Wille, lead analyst for financial sector risk at Verisk Maplecroft. In its latest assessment earlier this week, the Risk Advisory Service provided less than 33% of an IMF rescue package for South Africa by the end of the year.

"However, their influence is likely to wane in the months ahead as an ongoing anti-corruption campaign against prominent Zuma officials, including current ANC General Secretary Elias Ace Magashule, gains momentum."

Protesters for the impeachment of former South African President Jacob Zuma in Johannesburg, South Africa, on February 5, 2018.

Marco Longari | AFP | Getty Images

Zuma was asked to appear before a South African corruption investigation November 16-20. The investigation was set up two years ago to investigate allegations that Zuma allowed its employees to steal government resources while in office.

Both parties have vehemently denied any wrongdoing, but Zuma's nine-year tenure as president ended in February 2018 when he was ousted by his ruling ANC (African National Congress). His successor, current President Cyril Ramaphosa, has since sought to restore investor confidence and change his party's image.

Finance Minister Tito Mboweni has long stressed the need to prop up the South African economy after the pandemic. According to the IMF, GDP (gross domestic product) is expected to shrink by 8% in 2020.

"This includes a newfound willingness to confront powerful unions over unsustainable public service wages that consume 41% of government revenue," Wille said in the report earlier this week.

"These are signs that President Ramaphosa is holding the door open to a possible IMF deal to fund the country's pandemic recovery efforts."

Wille said that while lower consensus forecasts and the limited time it takes to plan a deal within Verisk's forecast horizon make a deal this year unlikely, there is still headroom for South Africa in 2021 and beyond , also from the IMF.

On Tuesday, Ramaphosa hosted a roundtable of infrastructure projects to stimulate private sector interest and around 210 billion South African rand ($ 13.3 billion) in funding. The government aims to boost investment from just over 16% now to around 23% of GDP by 2024, with the private sector accounting for 15% of GDP for that target.

Ramaphosa's Plan for Economic Reconstruction and Reconstruction highlights four priority actions designed to support the country's economy. These include expanding infrastructure, expanding energy capacity, direct employment incentives and stimulating industrial growth. Mboweni announced a budget update on October 28, outlining the country's troubled budgetary position and plans to repair the ship.

"A less ambitious (compared to the & # 39; active & # 39; scenario presented in June), albeit more credible (as it seems more achievable given the budget cuts announced), has been communicated. This leaves little room for error and requires that The Treasury Department is walking a tightrope to avoid a sovereign credit crisis, "Macro Jacques Nel, head of NKC African Economics in Africa, said in a research note on Wednesday.

"Budget cuts mean that next year service delivery will undoubtedly suffer and there will be little money for recurring expenses, let alone public investment."

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Katherine Clark