WATCH: Market reacts to Zuma recall
JOHANNESBURG - ANC secretary general Ace Magashule in a press briefing on Tuesday announced that the National Executive Committee (NEC) of the ANC had decided, after a marathon meeting, that President Zuma be recalled.
Magashule told media representatives that the d elivery of President Jacob Zuma’s recall letter to the presidential guesthouse took place on Tuesday morning.
The rand initially strengthened by 0.5% after Magashule announced the NEC's decision to recall the President, but it quickly gave up its initial gains as uncertainty around Zuma's resignation continued.
Moments leading up to Magashule's announcement the rand was trading at R11.92 to the dollar and at R11.88 shortly after the recall the announcement. Speaking to Business Report, Investec Chief Economist, Annabel Bishop said: "I think we're sitting in a situation now where political uncertainty has risen a little bit."
Bishop says the decision to recall Zuma, instead of him resigning, has increased political uncertainty, which is evident in the weakening of the rand. "What's best for financial markets is obviously political certainty, and obviously the higher certainty, the lower you tend to see confidence level," says Bishop. Bishop says political certainty would translate to policy certainty, which would in turn then tend to engender higher business confidence readings - which is the mechanism spurring economic growth and employment fixed investment. "We heard today that Cyril Ramaphosa will be delivering the SONA, which is a bit confusing, considering the President hasn't yet resigned - so it raises uncertainty further."
The deadlock on a new date for this year's State of the Nation Address (SONA) will not affect the delivery of the budget speech, set for February 21. Speaking on the budget speech, Bishop said: "In terms of the budget, should it be delayed, it would exacerbate uncertainty and worst case scenario could result in in a possible downgrade by Moody's."
Rating Agency Moody's has already indicated that it would wait for the delivery of the budget speech before deciding on any possible downgrade for the country.
The ANC has given President Jacob Zuma an ultimatum to resign as head of state by the end of Tuesday or risk being removed by Parliament.
- BUSINESS REPORT ONLINE