The findings against Cyril Ramaphosa in the section 89 panel report have raised questions over the president’s future and could influence policy and the ANC’s political prospects ahead of the general elections in 2024, according to Fitch Ratings.
But, the ratings agency said, broad policy continuity is the most likely scenario.
MPs are set to debate whether Ramaphosa should face an impeachment inquiry over the Phala Phala scandal on Tuesday next week.
This is after an independent panel chaired by former chief justice Sandile Ngcobo found that the president has a case to answer in relation to the origin of the money stolen from his farm in February 2020 and the clandestine efforts to recover it.
But Fitch noted in a research note that the political barriers to completing impeachment are high, because reaching the necessary two-thirds majority would require significant numbers of ANC legislators to vote against Ramaphosa.
The parliamentary vote will now be held just days before the ANC’s conference, where Ramaphosa is set to go up against the so-called radical economic transformation faction.
Even if Ramaphosa were to resign, Fitch believes it is more likely that a potential successor would emerge from his own faction rather than that of his rivals. The scandal could, however, further damage the reputation of the ANC.
When Fitch affirmed South Africa’s BB- rating last month, the ratings agency stated that the party could lose its majority in 2024. But it does not not expect that this would lead to immediate changes in economic policy, because the ANC would probably remain in government in alliance with smaller parties.
“The outlook for public finances, and for the government debt trajectory specifically, remains an important rating sensitivity for South Africa. Socioeconomic pressures, against a backdrop of high unemployment and extreme income inequality, are already a constraint on the pace of fiscal consolidation,” Fitch said this week.
“Should the government respond to the scandal by raising public spending beyond our expectations, resulting in a sustained widening of the fiscal deficit that points to a sharper rise in the government debt/GDP trajectory, this could lead to re-emergence of downward pressure on the rating.”
But Fitch added that the government has been relatively consistent in pursuing their debt stabilisation strategy in 2022. “In addition, ANC governments do not have a record of substantially loosening policy ahead of elections to boost their electoral prospects — though in the past their support was firmer.”
Political instability and increased policy uncertainty could further weigh on near-term investment prospects if they weaken business sentiment, Fitch said. This is as the country’s low growth potential, which is weighed down by deteriorating power and transport infrastructure, remains a key credit weakness.
Meanwhile, Ramaphosa has filed papers to the constitutional court to review and set aside the report, arguing that the section 89 panel strayed beyond its mandate.
