British asset manager casts wary eye at next ANC conference

Schroders, a UK-based multinational asset manager, has pointed out that while the market views the makeup of the government of national unity (GNU) favourably the potential for political gridlock and the ANC’s next elective conference present a risk for the administration.

The asset allocator, which has more than £750.6bn in assets under management, said the outcome of SA’s elections was market positive, and should ensure continuation and potentially an acceleration in structural reforms. But Andrew Rymer, a senior strategist in the Strategic Research Unit at Schroders, said that while the elections produced a desired outcome the risks remain elevated.

“This is the first coalition in SA in the modern era, and the ANC and DA have some significant policy differences to overcome. The risk to the outlook is political gridlock, and in a worst case a collapse in the GNU, potentially opening the door for parties with significantly different policy agendas to come into a coalition government,” said Rymer.

“There is also key man risk as, should [Cyril] Ramaphosa lose sufficient support within the ANC, he could be replaced at the next national conference of the ANC, due towards the end of 2027.”

The ANC has historically frowned on its president seeking a third term at the helm. Former president Thabo Mbeki tried unsuccessfully at the watershed Polokwane conference in 2007 to be elected to run the party for a third term. But the conference gave Jacob Zuma, now heading the MK party, a landslide victory against Mbeki.

Neither Mbeki nor Zuma completed their terms as head of state after leadership changes in the ANC, which saw them recalled by the party.

The next main event in the ANC will be its policy conference to be held before the elective conference, which is likely to be a referendum on Ramaphosa’s presidency of the ANC and the country.

Splintering

Schroders noted that the ANC and its splinter groups, the EFF and MK, still held about 65% of the total voter share. “These results reflect a splintering in the ANC vote: these two parties are led by former ANC members and combining their vote share with the ANC would reach 65%, close to the historical vote share of the ANC,” Rymer said.

The emerging market has seen an unprecedented year with most of the top countries in the basket heading for elections. They include Mexico, India and South Korea. Schroders data shows that the rand has held up better than Mexico’s peso.

“The equity market and the rand have picked up after the announcement of the GNU and Ramaphosa’s inauguration. The MSCI SA is now up 2% in US dollar terms year to date [on June 27]. The rand has also recovered and the 10-year government bond yield is down to 10.2%,” said Rymer.

khumalok@businesslive.co.za