No major policy changes: Zuma

22 September 2008

African National Congress (ANC) president Jacob Zuma has moved to reassure investors following Thabo Mbeki’s resignation as President of South Africa.

Mbeki announced his decision on Sunday, after being asked to resign by national executive committee of the ruling ANC. He will remain in office until the National Assembly accepts his resignation and determines the date of his departure.

At a press conference in Cape Town on Monday, Zuma said there was no reason for South Africans or overseas investors to be apprehensive.

“We will do all in our power to ensure stability is maintained in [the] government and in service delivery,” Fin24.com reports Zuma as saying. He further stressed that South Africa’s economic policies would remain “stable, progressive and unchanged”.

According to Fin24.com, Zuma said that South Africa’s Cabinet ministers had so far given the party assurances that they would not resign before the 2009 general elections.

‘South Africa needs more investment’

This is not the first time that Zuma has sought to allay investors’ fears over the coming change in South Africa’s government.

Meeting with various business groupings at home and abroad in the lead-up to the ANC’s national conference in Polokwane in December, Zuma made it clear that South Africa needed more foreign and domestic investment, and urging the domestic business community to invest in the economy in order to encourage its international counterparts to do the same.

And in his first public address as ANC president at Polokwane, Zuma said that ANC policies, “including economic policies that have been adopted at this conference, do not indicate a fundamental shift from the policies that the ANC has adopted since it has come into power.

“There is therefore no reason why the domestic or international business community – or any other sector – should be uneasy.”

At the same time, Zuma told the conference delegates that the ANC remained fully committed to black economic empowerment as a means of increasing participation in the economy.

“While encouraging the creation of a conducive environment for investment, we remain cautious not to compromise the national democratic revolution, which is our guiding philosophy in policy formulation and implementation,” Zuma said.

“Our alliance partners [the Congress of SA Trade Unions and the SA Communist Party] are key stakeholders in policy development and implementation. We will be able to continue to work together as a community, business and labour, to find workable solutions.”

‘Unlikely to rattle local markets’

Business Day, meanwhile, reports that Mbeki’s resignation is unlikely to rattle local markets for a number of reasons, including that Finance Minister Trevor Manuel has indicated that he will not resign, nor have there been calls for him to do so; and that local markets are still more worried about the global financial crisis.

“The implications for South African markets of the rescue package in the US will be bigger than the impact of Mbeki’s departure,” Business Day reports Citigroup economist Jean Francois Mercier as saying.

“They may underperform a little bit, but I don’t think domestic political news will push markets down.”

In addition, the paper says that what financial markets hate the most is uncertainty, and there was now no case for anxiety over a mismatch between the two “centres of power” held by Mbeki and Zuma.

Leadership change expected

Econometrix Treasury Management economist Russell Lamberti told BuaNews that while there was a potential for political instability should a leadership vaccum develop, this was being countered by investors being distracted by the US government’s proposed US$700-billion (about R5.5-trillion) bail-out of American companies struggling with bad debt, and the fact that a change in leadership was already expected.

“Leadership change was expected in South Africa within the next seven or eight months anyway, so although the speed of change came as a surprise, investors expected the change,” he said.

Lamberti added that the peaceful manner in which Mbeki was recalled by the ANC also allayed investors’ fears, as the decision was done in a respectful manner within the institutional structures of the ANC.

He also believed that Mbeki’s resignation would be good test of just how stable South Africa’s institutions were, and whether or not the government, in its entirety, was able to function without a designated leader.

“The next 12 months will be very interesting .foreign investors know what’s going on in South Africa and have a good understanding of the political situation,” Lamberti said.

Wait-and-see

Nedbank economist Nicky Weimar told BuaNews calm seemed to be prevailing on the markets, as the news came in the wake of a fairly stormy week on global markets.

“There has been no real reaction and very little response on the markets at the moment . I suppose it’s because the markets expected the change,” Weimar said.

Global markets have undergone a period of carnage in the last year, she said, and South Africa has not been spared from this either. The world economy was in the worst shape it had been in since the Wall Street crash of 1929, known as the Great Depression.

“The world itself is facing an uncertain future . so it’s going to be a ‘wait-and-see’ attitude amongst investors for the moment,” Weimar said.

SAinfo reporter and BuaNews

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