VBS

Dlamini-Zuma reassured the business sector that radical economic transformation wouldn’t be unfair and that there would be consultation should she become president of country in 2019. (Gallo / Sowetan / Sandile Ndlovu)

The rand could weaken by R2 to the dollar if Dlamini-Zuma is the next ANC president

Well, business have a favourite…

VBS

Dlamini-Zuma reassured the business sector that radical economic transformation wouldn’t be unfair and that there would be consultation should she become president of country in 2019. (Gallo / Sowetan / Sandile Ndlovu)

A new survey of 320 businesses in and outside of South Africa, compiled by Rand Merchant Bank, has shed some light on what corporates expect to happen at the ANC’s 2017 elective conference and what impact it will have on the currency.

Also read: ANC Elective Conference Explained: Here’s how it will work in December

Deputy president Cyril Ramaphosa and former African Union chair, Nkosazana Dlamini-Zuma seen as the front-runners to take over from Jacob Zuma. Both candidates will have a very different impact should they win.

Business leaders surveyed preferred Ramaphosa and expected the rand to strengthen by 50 cents to R1.00 to the dollar should he win.

Dlamini-Zuma, on the other hand, is expected to send the rand nosediving, with those survey expected the currency to weaken by between R1.00 and R2.00 to the dollar.

This view was shared by both local and foreign businesses – though foreign businesses are more optimistic about the rand under Ramaphosa, RMB’s report showed.

What do business leaders expect to happen at the ANC Elective Conference?

While there is plenty of uncertainty, more than half (58%) of respondents see Ramaphosa as the front-runner to be the next ANC president; while a third (34%) see Dlamini-Zuma as the favourite. A further eight percent see a third candidate as an option.

Long-term economic outlook remains bleak

Whatever the outcome of the ANC’s conference, a negative cloud will likely remain over South Africa in the longer-term, with most (80%) of business leaders expecting another ratings downgrade in 2018.

“Currently, CDS spreads on foreign currency debt reflect that South Africa is sub-investment grade rated, although they do not fully price another downgrade,” RMB said.

“It is likely that if the sovereign is ‘downgraded’ again then South Africa will also lose investment grade status on local currency debt. It is not clear whether this is yet priced into the market.