Johannesburg - Markets reacted positively yesterday to signs that South Africa’s fifth general election had gone ahead without major hitches, and early results showing that the ANC will retain its significant support brought investors relief.
During the day the rand strengthened markedly to be bid at R10.33 to the dollar at 5pm from R10.52 overnight, while the JSE also traded in positive territory, underpinned by gains in the cellphone, retail, banking and industrial metals sectors.
The latest election was preceded by intense campaigning as the opposition DA sought to capitalise on what it perceived to be vulnerabilities within the ANC, especially around the issue of corruption and controversy over the use of public funds for upgrades to President Jacob Zuma’s private residence at Nkandla. Even so, the ANC was last night poised to retain its status as the ruling party, albeit with a reduced number of seats in Parliament. The DA was on course to retain control of the Western Cape.
The election was an important test for the markets, as their peaceful conclusion could help investor confidence.
Econometrix said on reflection, the ruling party was likely to pursuing a dual approach which aimed to avoid upsetting private business unduly by continuing to embrace market-orientated policies generally.
John Cairns, a currency economist at Rand Merchant Bank, said: “The market reaction to the early results has been limited. We expect a positive response, driven by foreign investors, in the likely event that final results are similar to those released so far.”
Two days before the election, Grant Thornton said its latest quarterly tracker statistics revealed 65 percent of business executives were putting investment decisions due to concerns about the future direction of the country.
In addition, 60 percent of business executives stated their business operations have been affected by poor government service delivery.
Annabel Bishop, the chief economist at Investec in South Africa, said: “An ANC majority in the 2014 elections was anticipated, so I do not think there will be much impact either way on investor sentiment.”
Indeed, the peaceful outcome was expected and the rand has seen some strength as a result of this and recent comments from the US Federal Reserve.
“With this, [Zuma] is much less beholden to the left,” political analyst Nic Borain said, adding he expected Zuma to appoint a technocrat cabinet with the express mandate to roll out policies to boost growth.
“There’s no deeply insightful change, but the bottom line is that by 2019 they are going to have to be growing this economy and making sure they can still raise tax revenue.”
The ANC could secure 260 seats in Parliament, four fewer than after the last vote in 2009, the latest SABC predictions indicated yesterday. It foresaw the DA would increase its number of seats by 22 to 89.
Julius Malema’s Economic Freedom Fighters would have 21 seats in the National Assembly, according to the SABC.