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There is no clarity yet which of the two factions in the ANC – those behind newly-elected ANC president Cyril Ramaphosa or those supporting the closely defeated Nkosazana Dlamini-Zuma – will dominate when the ruling party sets the economic agenda for South Africa going forward, political analyst Daniel Silke told Fin24 shortly after the election result was announced on Monday evening.
This view was echoed by Tinyiko Ngwenya, economist at Old Mutual Investment Group.
“What type of economic policy can Cyril Ramaphosa realistically push through with who he has at his side?” Ngwenya told Fin24.
“Foreign investors are very agnostic. They don’t really know much about SA politics. They will just be glad that Cyril won. SA investors might be asking some questions though. With David Mabuza as deputy president, Ace Magashule as secretary general and Jessie Duarte as deputy secretary general, the question that will be asked is: who is really in charge?”
Nazmeera Moola, co-head of fixed income at Investec Asset Management, said the markets will be relieved that Ramaphosa has been elected as president of the ANC.
“The composition of the Top 6, though, is extremely divided and that is why voting was so close. It is because of this divided Top 6, that the composition of the NEC will now be key in determining how long Jacob Zuma remains president, what the composition of the Cabinet will be and what sort of economic policy we will have going forward,” she told Fin24.
Silke said the bottom line is “a win is a win” for Ramaphosa, but the exceptionally close election results and the fact that this is now a mixed slate which also includes those who were pro-Dlamini-Zuma, will make it a weak mandate for Ramaphosa going forward.
“He will find there will be checks on him going forward. Ultimately it is a very weak victory for Ramaphosa and the division that existed in the ANC over the last number of years has been perpetuated in the elections of the Top 6,” said Silke.
“There is no clarity, therefore, as to how the ANC will proceed to balance more radical approaches with a more market-friendly approach. The split down the middle really creates a danger of further governance and economic policy inertia or gridlock in the ANC going forward.”
Therefore, although he thinks investors and the business community will breathe a sigh of relief at the election of Ramaphosa, once the divided nature of the way delegates voted sets in Silke believes the ANC – and by implication SA itself – is in for a continued turbulent time until the next general election.
Wits economist Lumkile Monde warned that the new Ramaphosa presidency faces some choppy waters ahead, because of the split vote.
“There are definite concerns,” he said. “We thought the centre would be strong, but now it might not hold given the clear division.”
He said he remains sceptical whether Ramaphosa will be the great success everyone expected, taking into account his deputy and secretary general.
In all likelihood, Ramaphosa will not be able to push through the policies and make the drastic moves he promised in his campaign.
Monde added that the only meaningful change for South Africa will now be in 2019, when the general public will vote.
Alexander Forbes economist Lesiba Mothata told Fin24 shortly after the announcement of Ramaphosa’s election that when expectations in the market are confirmed – as has been the case with Ramaphosa’s election as ANC president – one could see the rand appreciate even further as a result.
“There has been a political premium in the rand and SA bonds. The news of Cyril’s election means he is well placed to turn the economy around. His new deal is a good philosophy to have around the economy – although it needs a bit of tweaking. From here it looks like that premium in the market is going to unwind,” said Mothata.
“When we do our fair value calculation, the rand should be at R12.50 – because the premium was put in there. When the political noise gets removed from the market and bonds are stronger as rate increases are likely to continue from here and rating downgrades are likely to slow, the rand should go even better than R12.50.”
On the other hand, economist Mike Schüssler told Fin24 that, while the rand has strengthened quite a lot, he thinks it has over-reacted. In his view, the rand will pull back again over the next few days and weaken against the dollar and other currencies “as people realise it was not a clear-cut victory”.
“The rand over-compensated for a Ramaphosa victory and investors will see a much weaker rand if we do not solve economic problems quickly in the next few months,” commented Schüssler.
“Although the election of Ramaphosa is good, it was basically a split vote and that might be in a sense a bad outcome for SA. It probably means there won’t be the unity in planning needed at top of the ANC. A lot of real radical changes are needed for economic growth – for instance in the labour market or regarding state-owned enterprises – but this might not be that easy to achieve.”
Economist Fanie Brink’s view is that, regardless of the victory for Ramaphosa, the crux of the matter is that without a return to a “full capitalist economic system” the SA economy will be “destroyed further”.