JOHANNESBURG – THE volatile South African currency, the Rand, is forecast to strengthen against major currencies if the ruling African National Congress (ANC) succeeds in its plans to recall President Jacob Zuma.
Zuma’s career appears to be hanging by the thread owing to prevailing reports the ANC National Executive Committee (NEC), the party’s highest organ, is working on an exit plan for the scandal-prone politician to resign.
His political fortunes have taken a battering after a faction of the party aligned to him, and led by former wife Nkosazana Dlamini-Zuma, lost at the elective conference in December.
Then, the Rand reacted positively following Zuma’s party and government deputy, Cyril Ramaphosa, winning the contest to succeed him.
It firmed by almost 4 percent against the US currency to R 12,55.
On Monday, it hit a fresh two-and-a-half year high, trading at12,08 in a move analysts attributed to prospects of Zuma’s exit from office as leader of Africa’s most advanced economy.
He has led South Africa since 2009 after taking over from Kgalema Motlanthe, who served from 2008, following the resignation of Thabo Mbeki.
John Cairns, the Rand Merchant Bank (RMB) Currency Strategist, said, “Domestic political developments will spur yet further optimism towards the Rand.”
He said the appointment of a new board at the beleaguered power utility, Eskom, as well as the World Economic Forum (WEF) annual in Davos, Switzerland also raised prospects of a better performance by the local currency.
Government has appointed businessman Jabu Mabuza as the new chairperson with Phakamani Hadebe as the acting group chief executive.
“Expect further optimism as the South African contingent at Davos talks the talk. South Africa is even, according to some reports, being touted as the emerging market story of 2018!” Cairns added.
Ramaphosa is leading the South African delegation to Davos.
Zaakirah Ismail, the Standard Bank Fixed Income Strategist, said these market-perceived “positive developments” saw the Rand in Standard’s first quarter 2018 (Q1:1)8 trading range of 12,00 to12,20 to the US currency.
“Our constructive Rand view as well as the announcements over the weekend are important positive developments in terms of the policy steps required ahead of the Moody’s credit rating review after the 2018 Budget,” Ismail said.
She also mentioned government also announced several measures to strengthen governance at Eskom.
This includes the appointment of a new board and a directive to the board to remove those executives that face allegations of corruption.
Absa Capital stated it was possible the ANC could remove Zuma after Ramaphosa returned from Davos but alternatively it could wait to allow him to give the State of the Nation Address in early February, so Zuma could take responsibility for the funding costs of his announcement on free university education at the ANC conference in December.
“But, regardless of the precise timing of Zuma’s departure, the decision of the NEC is positive, in our view,” the firm stated.
According to Absa Capital, another important move by the NEC, which further loosens the grip of the Zuma faction on the ANC, was the decision to disband the provincial leaderships of the Free State and KwaZulu-Natal instead of allowing the court-invalidated leaderships to continue to operate, but as temporary provincial task teams.
– CAJ News