Following a neck-and-neck battle with fellow candidate Nkosazana Dlamini-Zuma, the Monday evening announcement of Cyril Ramaphosa as ANC Presidential victor has buoyed investor sentiment, with the rand surging 4% against the dollar before the final result was even known.
The composition of the Top-6 leadership of the ANC is a unique mix between the two opposing ‘slates’.
This will hopefully ensure unity in the ruling party and guarantee a smooth transition into this new era. The only remaining question is whether Mr. Ramaphosa will be able to lead effectively and implement his New Deal.
The South African equity market was caught between the benefit of what promises to be an improved business environment and a much stronger currency. Global markets are also making new all-time highs, so the entire global environment is conducive for risk assets. South African bonds also had a big day with yields declining nearly 40bps.
A window of opportunity
However, while a Ramaphosa victory has already proved positive, there is still a long way to go in regaining business confidence and revitalising South Africa’s faltering economy.
Ramaphosa has a small window of opportunity akin to the famous ‘100 days’ to prove that he is the catalyst for change needed in government.
If he stumbles at any time during this embryonic period, he’ll be seen as a token rather than the strong leader needed and market sentiment will quickly turn against South Africa.
South Africa has suffered from an extreme trust deficit during the last five years, sending business and consumer confidence plummeting.
Ramaphosa’s key challenge as ANC President will therefore be to deliver economic policy certainty in order to regain investor confidence.
Public-private partnerships can only flourish in an environment where government is viewed as an enabler rather than a stumbling block to doing business.
Corporate South Africa is eager to work with government in tackling issues such as poverty and unemployment, but needs an assurance that corruption won’t impede progress. Government’s involvement should be oil to the process, not an abrasive.
If business were to see government attempts to root out corruption and deliver a better sense of policy certainty, investor sentiment would “shoot through the roof. This in turn would spark a positive snow-ball effect that could uplift South Africa’s economic growth and revitalise the overall business landscape.
Ramaphosa’s New Deal sets economic targets such as reaching 3% GDP growth in 2018, in keeping with the National Development Plan (NDP) introduced in 2012 for achieving economic transformation.
Achieving these targets would have a profound effect on the economy, but the real test will be to see whether Ramaphosa’s New Deal and the NDP will finally receive real policy attention rather than lip service.