JOHANNESBURG - The rand cheered as the ANC announced the new president of the politic party following the election process that kicked of on Saturday (16 December 2017).
The rand firmed 2% on Friday as the ANC prepared to elect its new leader. At 10am on Monday, the rand was trading at R13.09 against the dollar and shortly after the announcement; the rand firmed to R12.59 against the US dollar.
The rand rallied all through the afternoon as traders placed their bets on Ramaphosa winning the election.
Courts ruled that senior officials in two provinces seen as supporting ANC presidential candidate Nkosazana Dlamini Zuma had been illegally elected and could not attend the conference.
“Markets are definitely viewing that court ruling as positive for the rand, more especially positive for the (Deputy President Cyril) Ramaphosa campaign,” said senior forex dealer at Standard Bank, Oliver Alwar.
The race was mainly between Ramaphosa, generally favoured by financial markets, and Dlamini Zuma.
It was seen as too close to call. Ramaphosa, a billionaire businessman, was seen as the most business-friendly candidate, compared with Dlamini Zuma supported by President Jacob Zuma, her former husband, and the five other contenders.
Hopes that Ramaphosa – seen as business friendly - could win the contest have lifted the rand some 7 percent in the past four weeks against the dollar, making it one of the best performing emerging currencies in recent weeks.
Prior to the announcement, Sinovuyo Mpakama, Director: Debt Issuance & Management, National Treasury of South Africa, said, ""The markets are taking a wait and will see the approach, waiting for the results of the voting to be confirmed. Both the rand and bonds moved very strongly on Friday in anticipation of a favourable outcome from the conference, with the rand dipping below R13/$, hitting R12.96/$ on optimism, earlier in the week the rand was trading at around R13.50/$, thus showing a strong 50 cents strengthening. The benchmark R186 dipped below 9% to hit 8.95% before receding slightly to trading at 9%. This is a 25 basis point strengthening from around 9.25% earlier on in the week. The market closed the week off on strong optimism and is now taking a bit of a cautious stance until the outcome of the elective conference is confirmed".
Guillaume Tresca, a Paris-based strategist at Credit Agricole, told Bloomberg, “The market is clearly pricing a Ramaphosa win at the moment and is getting ahead of itself. First, Zuma could remain president until 2019, which means there is a risk of negative political noise. Second, there could be a balance of power to keep the unity of ANC, so it could be less positive than earlier thought.”
Sonja Keller, strategist at JPMorgan, Johannesburg, also told Bloomberg, “Should Ramaphosa be elected, financial markets probably would anticipate Moody’s holding off on a ratings downgrade in March next year. If the election results in a mixed slate with the top six new ANC leaders drawn from both the modernist and traditionalist camps, such expectations could be muted or indeed absent.”
- BUSINESS REPORT