A street vendor sells regalia depicting South African President Cyril Ramaphosa outside the venue for the ANC 107th anniversary celebrations at the Moses Mabhida Stadium in Durban on January 12, 2019. Picture: RAJESH JANTILAL / AFP
A street vendor sells regalia depicting South African President Cyril Ramaphosa outside the venue for the ANC 107th anniversary celebrations at the Moses Mabhida Stadium in Durban on January 12, 2019. Picture: RAJESH JANTILAL / AFP

Nairobi — With the winner of the May 8 elections hardly in doubt, it is uncertainty around the margin of victory for the governing ANC that has stock investors’ attention.

Money managers and analysts have said a strong showing for the ANC, potentially exceeding 60% of the vote, should boost stocks by strengthening President Cyril Ramaphosa’s ability to drive improvements in SA. But opinion polls show differing pictures of ANC support, ranging from 51% to 61%.

A decisive victory would empower Ramaphosa’s pro-business agenda, including releasing spectrum to the telecommunications sector, said Warwick Bam, head of research at Avior Capital Markets in Cape Town. A less-restrictive visa policy for visitors would spur tourism earnings, while clearer policy on the thorny land expropriation question would improve investment in agricultural production.

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“Food producers, food retailers, consumer staples, apparel retailers and hospitality will benefit the most from the increased consumer confidence,’’ Bam said, followed by banks and insurers. Industrial, construction and cement companies may see a delayed benefit as money flows into projects in the next one to two years, he said.

A resounding ANC victory would trigger a rally in SA assets, Colin Coleman, head of of Sub-Saharan Africa at Goldman Sachs, said in a Bloomberg Television interview this week. Were the ANC to reach the 60%-mark, “then the market will be very bullish”, according to Coleman. Anything below that level would limit Ramaphosa’s ability to make the changes he wants, he said.

Investors are showing few signs of anxiety as next week’s poll approaches. SA stocks have made their best start to a year since 2007, advancing 11% as of the end of April, almost in line with the 12% gain by emerging-market peers. The benchmark index advanced 0.8% as of 11am in Johannesburg on Friday, the most in more than two weeks.

Investors have been frustrated that, despite Ramaphosa’s good intentions, the SA economy remains “trapped in stagnation”, with a lack of political will to make the changes needed to escape from this, Allan Grey portfolio manager Sandy McGregor.

The key post-election issue is whether Ramaphosa will be “more assertive in implementing changes that he knows are necessary if the economy is to start growing again,’’ said McGregor. “Perhaps the most liberating aspect of the election will be that it is behind him.’’

Investors should keep an eye on the contest for control in South Africa’s nine provinces, said McGregor. Voters may feel more free to express their discontent with the ANC’s poor record over the past decade in this part of the ballot. An adverse provincial outcome for the party will promote further policy debate, “which may have profound political and economic consequences”

A clear majority for the ANC in Gauteng would be a positive for equity investors by removing the need for a potentially unstable coalition government in the region, said Sanlam Investments economist Arthur Kamp.

Worst case

A sell-off could ensue if the ANC fails to win decisively, or if Ramaphosa proves unable to consolidate power within the party, according to Avior’s Bam. In his “worst-case scenario”, the ANC’s majority falls below 55% and the far-left EFF wins more than 12% of the vote. Such a result could also spur social unrest and hurt consumer and business confidence as South Africans would expect limited political reform and a lack of accountability for corruption experienced in the past decade, he said.

The telecoms sector would be adversely affected by an election result that prolongs policy uncertainty, Citigroup said in an April report. SA energy and mining stocks could provide a hedge against a broader market sell-off, as these companies would benefit in the event of a slump in the rand because of their local-currency costs and sales of dollar-priced products, the bank said.

With Ana Monteiro, Guy Johnson, Prinesha Naidoo and Mike Cohen.

Bloomberg