CAPE TOWN - Deputy President Cyril Ramaphosa’s hot off the ballot election as ANC President opens new ground for South Africa’s beleaguered economy and credit rating.
Moody’s says that the new leader may catapult a shift in SA policy and increase business confidence.
This comes after the ratings agency released a report today, highlighting the former businessman as the more market-oriented of the two presidential candidates in the election.
However, his narrow win of 2 440 votes in relation to contender, Nkosazana Dlamini-Zuma’s 2 261 votes may well complicate his success on reforms.
“The simple prospect of a new approach to any of.....the weaknesses in SA’s credit profile could in itself boost business confidence and support a pick-up in investment and growth”, said Moody's.
Just last month, Moody’s placed SA on review for downgrade, one notch above junk status, at Baa3.
"It remains to be seen whether such high level objectives will actually bring about change that would engender business confidence. However, swift implementation of even a subset of reforms – in particular those pertaining to fiscal stability and to SOE governance – would
likely boost confidence, investment and growth," said Moody's.
"It is unclear whether Mr Ramaphosa will have the political weight in parliament to implement any such shift. Jacob Zuma remains president of (SA) for now...President Zuma is under no constitutional obligation to (step down) until the national elections in 2019."
It seems as if further observations will be measured within the next upcoming months, with Moody’s expected review to transpire after the announcement of SA’s 2018 Budget in February next year.
The ratings agency said this will allow it to assess "the willingness and ability of the SA authorities to implement policies which will address ... challenges".
Although Ramaphosa’s victory has come to light, his implementation and plans as ANC President will be closely scrutinised.
On his future plans as ANC President, Ramaphosa said he will focus on promoting growth, improve investor confidence and tackle a disheartening 28% unemployment rate.
Ramaphosa declared his plans to create 1 million jobs within 5 years.
Moody’s reacted to this plan, noting that education is one clear area of tension.
"While all recognise the need for reform to enhance human capital and reduce inequality, it remains to be seen how that will be achieved without further undermining already-stretched public finances," said the ratings agency.
Moody’s further made reference to the announcement of free higher education for poor and working-class students, at the outset of the ANC conference.
This in effect would increase the education spend to 1% of the gross domestic product (GDP) a year in the next three years.
Moody’s regards this as contentious and implementation which still remains to be seen.
Meanwhile, the rand reacted positively to Ramaphosa’s electoral victory on Monday.
The rand responded well strengthening against the US dollar the election of the 65-year-old former union leader and businessman. At the close of business on Monday the rand was trading 2.6% firmer at 12.75/dollar as of 1749 GMT.
- BUSINESS REPORT ONLINE