The rand rallied to a one-week high yesterday as investors cheered the re-election of Cyril Ramaphosa as the president of the governing ANC.
However, analysts cautioned that this was just the first hurdle that Ramaphosa has to clear to secure support for his economic policies from the majority of conference delegates.
Ramaphosa comfortably won re-election with 2 436 votes against 1 897 votes garnered by his former health minister Dr Zweli Mkhize, following a fiercely contested campaign yesterday.
To the investor community this signalled a continuation of policy reforms that Ramaphosa’s administration in government had already embarked on, such as allowing private sector participation in state-owned enterprises.
As a result, the rand strengthened from R17.64 against the dollar early in the morning to R17.26/$1 after the election of the ANC’s top leadership was concluded.
The rand recovered from its lowest in three weeks over the weekend as divisions within the ANC, recessionary fears driven by the hawkish tone from the US and European central banks, rising Covid-19 cases in China, and ongoing Stage 6 load shedding all weighed on the currency.
Ramaphosa’s first term as ANC president was characterised by sluggish decision-making and sometimes open opposition to reforms from the party’s alliance partners, which crippled his reform programme.
However, Oxford Economics Africa head of macroeconomics Jacques Nel said Ramaphosa’s victory for a second term was a win for structural reforms.
“Ramaphosa will be relatively pleased with the make-up of the party’s Top 7, and today’s developments are seen as a win for reform,” Nel said.
“The rest of the party’s Top 7 is made up of figures he can work with. The result is risk-positive,” he said.
The relief for investors was also expressed by Finance Minister Enoch Godongwana who said Ramaphosa’s re-election was a good thing, as it suggested continuity in the country’s economic policy.
“There is going to be continuity in the implementation of structural reforms the president was pursuing, it will include the transformation of Eskom and power to the grid,” Gondongwana said.
“Our major challenge is poverty and unemployment, so our emphasis will be on those policies to give us a better outcome. There has been some worry from the South African people about the economic part, and we have been trying to tell people that what matters in the ANC is economic policy…”
Ramaphosa’s re-election will also assure the markets as he managed to get the majority of the leaders on his ticket into the ANC’s top structure.
Old Mutual Wealth investment strategist Izak Odendaal said it was important that most of the other Top 7 leaders of the party were also close to Ramaphosa.
This contrasts with the previous top leadership grouping that was split down the middle, with other leaders openly working against him.
Odendaal said though the results of the broader ANC national executive committee leadership body had not been made public yet, they will probably also reflect a stronger representation of Ramaphosa allies than during his first term in office.
“The initial market response to this news was positive, though we are now in thin festive season trading. The implication is that Ramaphosa will be able to continue the path of economic and institutional reform, which is ultimately market positive. Indeed, with a stronger mandate, he should be able to accelerate these reforms to a degree,” Odendaal said.
“However, key questions remained on Monday afternoon, including (that) the conference had not yet adopted its economic policy resolutions.
“Five years ago, Ramaphosa’s victory coincided with several contentious and ultimately distracting resolutions including on land expropriation, and the nationalisation of the Reserve Bank.
“Some of the biggest obstacles to reform have come from the ranks of his own allies, particularly in terms of energy policy. How will Ramaphosa address this? Nonetheless, potentially investor-negative outcomes have not materialised, and markets are right to cheer the results so far,” he said.
BUSINESS REPORT