Markets calm over Ramaphosa win— for now
News that Cyril Ramaphosa had been elected president of the ANC on Monday evening pleased the currency markets at first, with the rand dollar exchange rate improving slightly after the announcement.
However it quickly lost some of its gains as the market further digested appointments for the top six, to which only two of Ramaphosa’s preferred candidates made the cut.
Some analysts have called the make-up of the ANCs highest officials “a disastrous combination” and “good news for the opposition”, while others believe unity has won out.
The rand to the dollar had improved to R13.10 over the weekend in anticipation of a Ramaphosa win.
On Monday while votes were counted, it improved to 12.80 and upon announcement of the win, it had improved to R12.60.
However, within half an hour it had weakened to R12.75.
It is yet to be seen how the stock and bond markets will react upon opening on Tuesday morning.
Economic strategist at Argon Asset Management, Thabi Leoka, said the market was clearly anticipating a Ramaphosa win, given that the rand dollar exchange was at a six month low in the run up to the announcement, and so had positioned itself well.
“I think the outcome is a strike of genius for the ANC … I guess unity happened,” Leoka said. “It will be interesting to see if Cyril Ramaphosa will be able to push through policies he wanted to push through with a unity top six … policy is determined by the ANC and not by individuals.”
The combination of leaders in the top six was a “disastrous combination” despite Ramaphosa’s win, said Azar Jammine, chief economist at Econometrix. “It is a recipe for continued paralysis and I think we can now definitely expect a credit ratings downgrade,” he said.
While the rand had rallied on the results, Jammine did not expect this to be sustained.
It could be argued that taking the leader position was the most important win, but the role of Secretary General - now held by Ace Magashule - was a very powerful position in the ANC, said Jammine. Similarly having David Mabuza in the post of deputy president, meant that there was likely to be little action on corruption said Jammine.
Both figures are seen as controversial. Ace Magashule has been the long-standing premier of the Free State - presiding over the province when the Gupta family allegedly fleeced a provincial dairy farm project to fund a lavish family wedding at Sun City. Allegations of corruption have also dogged Mabuza in his leadership of Mpumalanga.
It was now highly unlikely that Jacob Zuma would leave his position at president of the country before his term ends in 2019, said Jammine.
“Opposition parties - both the EFF and the DA - are probably ringing their hands in glee,” said Jammine. “This is terrible for the ANC”
Meanwhile political analyst Ralph Mathekga argued that this conference was in reality won by David Mabuza - who earned more votes than Ramaphosa himself. Mabuza won his post with 2538 votes. Ramaphosa meanwhile narrowly won the presidency on 2440 votes against opponent Nkosazana Dlamini- Zuma’s 2261 votes.
The return of “very problematic” members of the top six such as Jesse Duarte and Gwede Mantashe, who have presided over the deterioration of the ANC under Jacob Zuma, meant it was going to be very hard for Ramaphosa to convince voters that the top six had changed.
To make it worse, he argued, controversial figures such as Magashule and Mabuza had been added to the mix
“This is just good news for the opposition,” Mathekga said.
“We have to ask ourselves who on this top six controls the levers of power in the ANC, and David Mabuza has more power than anyone else.”
Ramaphosa who has been seen as a “market friendly” candidate was now likely to face resistance when it came to driving economic policy. He “would be seriously moderated” when it came to policy formulation argued Mathekga.
“This means radical economic transformation is going ahead, it will be in moderation, but it is going ahead,” he said.
Ramaphosa’s key challenge as ANC president will be to deliver economic policy certainty in order to regain investor confidence, said George Herman, director of Citadel Investment Services.
Business organisations responded positively to the announced new leadership of the party ruling.
In a statement Business Unity South Africa (Busa) chief executive, Tanya Cohen, said business stood ready to work in partnership with the newly elected leadership. But, she said, the new leadership would need to take decisive steps to build business confidence and to have a practical plan of action to address economic woes.
Business Leadership South Africa congratulated the new leadership and called on it to provide regulatory certainty and policy stability that would accelerate and deepen transformation.
The South African government bond yield - the benchmark interest rate the government pays to borrowers - also improved reaching 8.85% by the time the bond market closed at 5pm. Trade will open again on Tuesday morning.
Certain stocks with higher exposure to the South African economy, such as retailers and banks, also saw share prices increasing before the market closed on Monday.