The Cyril Effect

The political landscape in South Africa is changing by the day. As I write this, the State of the Nation Address has been postponed for the first time in our young democracy, the ANC National Executive Council has set up, and then subsequently cancelled an emergency meeting, rumours abound that Zuma is on the verge of resigning and uncertainty is the order of the day. The stock market, South African bonds and the currency have been volatile and everyone appears to be waiting for what is coming next.

While one should be very careful of reading too much into politics when assessing markets and it is exceptionally difficult to make a call on these short term outcomes, we try to look through all the news flow and assess what is likely to be our reality in the medium to long term in South Africa. The election of Cyril Ramaphosa as ANC president in December last year has provided large sections of the South African populace with a sense of optimism and hope for the future. A hope that he can provide the leadership that the country needs to combat corruption and manage the economy in a sensible manner to ensure growth. On a medium to long term view, it is safe to say that South Africa finds itself in a better position post his election.

While the positivity is not unfounded, the reality is that the starting point for any recovery is not an ideal one. Ramaphosa takes over at a point where there are numerous challenges facing South Africa’s economy – corruption is endemic, growth is negligible, debt levels are rising and unemployment remains our core challenge. The change in leadership doesn’t result in any immediate improvement in any of these issues and implementing the various changes will require much hard work in the short term to deliver on that medium to long term potential.

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