South African assets lifted as Ramaphosa replaces Zuma

Cyril Ramaphosa was voted in as President of South Africa, senior members of the African National Congress party confirmed on Thursday, lifting the rand and companies exposed to the currency.

Jacob Zuma last night made a dramatic televised resignation speech that brought his nine years of rule to an end, having been recalled by his ANC party earlier in the week.

Ramaphosa will be officially sworn in as President around 1700 local time on Thursday, paving the way for a delayed ‘State of the Nation’ address next week. A former anti-apartheid activist, Ramaphosa has had success as a businessman and becomes, as the Guardian described him, a "standard bearer for the moderate, reformist faction" of the ANC.

As Zuma resigned rather than forcing the ANC into a no-confidence vote, several cabinet ministers received a stay of execution rather than being forced to quit.

Prime Minister Theresa May offered warm congratulations to President Ramaphosa on being voted in. "The United Kingdom greatly values its dynamic and forward-looking partnership with South Africa, underpinned by the strong people-to-people and business ties between our countries," she said.

"I look forward to working closely with President Ramaphosa to help build a healthier, more secure and prosperous future for both our countries.I very much hope to see the President at the Commonwealth heads of government meeting in London in April."

The state of the nation address and the national budget next week will prove to be important indicators of just how the new administration will be judged, said Oxford Economics political analyst Gary van Staden.

"It would be gratifying to see the dedication and purpose the ANC put into ridding itself of Zuma now directed into rebuilding the national economy, dealing with the rampant corruption still residing in the ANC (which cannot all be blamed on Zuma), improving its shoddy governance record and serving the people," he said.

"Financial markets, investors and businesses are not going to be distracted by the early removal of another president for much longer, and the attention will turn to what the new order intends to do and when it will do it."

RAND RALLY

The rand was adding to its recent gains on Thursday, climbing 0.6% on the dollar to $0.0858 and 0.2% on the pound to £0.0611. The currency, having advanced by nearly 2.4% against the dollar and strengthening against all of the G10 currencies this week, earlier hit its highest level since March 2015.

The recent strength of the rand has been built around the expectation that a new era led by Ramaphosa will usher in economic reform in the rainbow nation, said analysts at Rabobank. "However, given the backdrop of weak growth and with both the budget and the current account in deficit, there is a lot of work to be done."

Rand-exposed stocks in London were racking up gains as a result, led by Old Mutual, Mondi and Anglo American, which are dual-listed in London and Johannesburg.

"While ongoing dollar weakness across the currency markets has supported gains in the rand, the fact that it has managed to also advance against the G10 currencies suggests that the confirmation of Zuma vacating his position has benefited overall investor sentiment towards South Africa," said Jameel Ahmad, global head of currency strategy and market research at FXTM.

"The Zuma presidency was masked by multiple layers of political risk; confirmation of Zuma stepping aside should help the rand continue to climb to levels not seen since the days of the Federal Reserve preparing the financial markets for the normalisation of US interest rate policies."

RBC Capital Markets said that from a sentiment perspective, the change of leadership should "vastly increase" interest in Anglo, and presumably other South African companies.

"The emergence of a more pro-business ANC should allow for an improved operating environment. There is also a greater likelihood that Anglo, should it desire to, could make structural changes to its corporate structure that could streamline previous challenges like the capital controls on South African profits, etc."

Analyst Neil Wilson at ETX Capital said investors were breathing a sigh of relief after nine years of scandal.

"Growth has stagnated badly under Zuma and there is hope that this will usher in a period of greater political stability and maybe some economic reforms that can get the drivers of growth going again.

"Ramaphosa is seen as good for business and will tackle corruption and mismanagement. Not that he won’t face challenges of course - there are deep economic and social problems and the ANC remains pretty divided. But whatever happens under the new president, I think markets and business assume it won’t be anything like as bad as Zuma."