Rand goes up as Ramaphosa is elected to a second term as ANC president

On Monday (19 December), the South African rand gained more than 2% versus the US dollar after Head Cyril Ramaphosa was re-elected to a second term as ANC president.

Following the news, the rand gained to R17.22 per dollar, having begun the day around R17.60 ahead of the election results.

The rand’s destiny has been closely linked to the president in recent weeks, after a revelation on the Phala Phala controversy in late November sent markets into a tailspin, with investors unsure if Ramaphosa would stick it out in his post.

After Ramaphosa chose to battle the report, and his party vetoed the study’s approval in parliament last week, market fears over the political uncertainties in the nation lessened.

However, one more barrier remained ahead – the decision of the ANC elective conference.

The ANC declared this conclusion on Monday, with Ramaphosa earning a second term as president with an overwhelming majority of votes. Except two places – vice president, which Paul Mashatile won, and first deputy secretary general, a post presently held by Nomvula Mokonyane – it was a near clean-sweep for Ramaphosa’s slate in the party’s top 7.

Whatever the political world thinks of Ramaphosa, he has become enormously popular with investors and entrepreneurs. His second term as ANC president implies a continuation of the economic measures he has championed over the previous five years.

Despite the ANC triumph, the road ahead is still neither solid or fully clear, however.

Political observers have remarked that the Phala Phala incident has left the president’s image tarnished, and he now owes much of his political position and capital to specific characters who are not viewed in the same esteem.

On Monday, following the news, the rand was trading at these levels versus key currencies:

• ZAR/USD: R17.21 (-2.44%)
• ZAR/EUR: R18.29 (-1.93%
• ZAR/GBP: R21.03 (-2.14%)

Good news for stability

According to an analysis from Bloomberg, Ramaphosa’s triumph is good news the ANC, and also good news for political stability.

Support for the 110-year-old ANC, which has dominated South Africa since the end of apartheid in 1994, went below 50% for the first time in a local government vote last year, and multiple opinion surveys suggest it’s in risk of losing its national majority in 2024.

Confidence in the party has been undermined by its inability to stave off an energy catastrophe and reverse an economic slide that’s created severe unemployment, inequality and crime.

Ramaphosa is a seasoned politician in South Africa. A former trade union leader who built a fortune after moving into business, he helped to negotiate a peaceful end to White-minority rule in the early 1990s and chaired a commission that created the country’s first democratic constitution.

He succeeded Jacob Zuma as the nation’s president in early 2018 and committed to fight the economic doldrums and widespread corruption that developed in during his predecessor’s nine-year administration.

Since then, he has virtually destroyed Eskom’s monopoly, the debt-ridden state power firm that has caused sporadic blackouts in South Africa since 2008, allowing corporations to build their own generating facilities and feed the grid. After more than a decade of delays, the spectrum required to upgrade the nation’s telecommunications industry was sold.

Ramaphosa has also made strides in rebuilding the nation’s law-enforcement capabilities, which Zuma methodically eroded. Several former state-owned company executives, legislators, and party officials have been accused with corruption.

He’s had less success in reviving an economy damaged by the coronavirus outbreak and the energy crisis, and industry leaders and international investors have urged him to speed up changes required to help cut the country’s 32.9% unemployment rate.

Ramaphosa’s triumph is excellent news for the ANC, since a recent opinion survey found that if he were to be removed as leader, the party’s popularity would plummet to between 30% and 40%.