The rand appreciated sharply on Monday as investors welcomed the re-election of president Cyril Ramaphosa as leader of the ruling ANC.
Ramaphosa’s win — which he clinched after a last-minute heated race against his opponent Zweli Mkhize — has seemingly eased market uncertainty about the ANC’s policy trajectory, sending the rand firmer to R17.30 against the US dollar from about R17.70 overnight.
The president won comfortably with 2 476 votes against Mkhize’s 1 897.
The ANC’s elections saw Ramaphosa coming up against the so-called radical economic transformation faction, which critics feared would steer the governing party off course, hamstringing the implementation of economic reforms.
Investors recently signalled their support for a Ramaphosa presidency after the release of parliament’s section 89 panel report on the Phala Phala scandal and rumours the president may resign. The rand tumbled 4% and bond yields spiked to their highest levels since 2020.
In a research note released the day before the ANC’s 55th elective conference got underway at Nasrec, Johannesburg, the Bureau for Economic Research (BER) noted: “Going into 2023, the outcome of the leadership race and the policies adopted by the newly elected ANC national executive committee [NEC] at the conference could impact investor, business and consumer sentiment.”
This was on full display in early 2018, the BER added, when confidence soared following Ramaphosa’s election as ANC president in December 2017.
“After the initial euphoria, sentiment soured as Ramaphosa’s renewal agenda was diluted by the contestation on some of the policies adopted at the 2017 conference, most notably expropriation without compensation.”
Monday’s result is in line with the BER’s expectations, which saw Ramaphosa being re-elected with a significantly larger majority than in the last elective conference. In 2017, Ramaphosa won with 2 440 votes against Nkosazana Dlamini Zuma’s 2 261.
“In isolation, this should strengthen his hand to accelerate the reform agenda during the second term,” the BER said.
“However, with ongoing intense horse-trading between provinces on the other top ANC positions … there is greater uncertainty about whether as a collective, the new ANC leadership will be reform minded.”
Ramaphosa did not win with his complete slate. Importantly, he will be deputised by Paul Mashatile, who was not supported by the president’s faction.
In sum, the BER said, “while a Ramaphosa second term should boost confidence on the margin, the composition of the top six [leaders] and broader ANC NEC is unlikely to spark animal spirits”.
In a research note from earlier this month, Investec chief economist Annabel Bishop said she believed there would be a cabinet reshuffle next year.
She said a victorious Ramaphosa is expected to use this opportunity to remove opponents of his economic policies and reforms, which would allow a speedier implementation of structural reforms in South Africa.
Despite recording unexpectedly robust growth in the third quarter of 2022, the economy is in desperate need of higher and more sustained improvements, after a decade of stagnant growth and rising unemployment.
Ramaphosa’s administration has touted its structural reforms, which include unlocking new energy generation, as the key to future growth.
