Dec. 21 (Bloomberg) -- South Africa’s credit-rating downgrades should be reversed after the ruling African National Congress adopted clear policies, said Cyril Ramaphosa, the party’s newly elected deputy president.
“I’m sure the downgrade will turn into an upgrade,” Ramaphosa told businesspeople in the central city of Bloemfontein today. “We deserve that, we’ve got great policies and there’s even a determination to implement those policies.”
The ANC yesterday resolved to consider raising taxes on mining companies and increase “strategic state ownership” in the economy, while rejecting proposals to nationalize mines and banks. Delegates also said at the party’s national conference the central bank should adopt a “more flexible monetary policy regime.”
Moody’s Investors Service and Standard & Poor’s have downgraded the nation’s debt since Sept. 27 and warned of further cuts, citing pressure on the ANC government to boost spending and after the worst mining strikes since the end of apartheid curbed economic growth. Africa’s biggest economy is forecast to expand 2.5 percent this year, the least since a recession in 2009, and too slow to slash a 25.5 percent unemployment rate, according to government estimates.
“If there ever was a lack of clarity, people should be absolutely clear now of where the ANC stands as far as its policies are concerned,” Ramaphosa said.
President Jacob Zuma cemented his hold over the ANC at the conference as his allies and Cabinet ministers won election to the ANC’s top leadership structure. Kgalema Motlanthe, who lost the vote for the ANC top spot, will remain as the country’s deputy president until the 2014 general election, Zuma said today.
Zuma won the backing of 75 percent of conference delegates. The other top five party posts went to his favored candidates, as did most seats on the 80-member National Executive Committee, the ANC’s main decision-making body.
Finance Minister Pravin Gordhan, Public Enterprises Minister Malusi Gigaba and former central bank Governor Tito Mboweni were among those elected to the panel. Ex-finance minister, Trevor Manuel, who leads the National Planning Commission, declined to stand for the NEC.
The ANC has ruled country since the end of white segregationist rule in 1994 and holds about two-thirds of the seats in Parliament. Zuma’s dominance in the party may give him greater scope to determine policy, possibly reducing the influence of labor unions.
“Zuma is firmly in the ascendancy at this time,” Jolyon Ford, an analyst at Oxford Analytica in London, said in an e-mailed note to clients yesterday.
While Ramaphosa’s election will probably help ease concerns about policy, there are still downside risks for the mining industry and economic growth, Christian Esters, a credit analyst at Standard & Poor’s, said by phone from Frankfurt.
“The mining industry is probably still looking for more clarity on the tax regime and regulation,” he said today.
Zuma reiterated that the government’s National Development Plan, spearheaded by Manuel, would be the basis of the government’s economic policy going forward. The plan sets out the investment needed in roads and rail projects, health, education and other services to boost growth and investment. It also calls for a review of labor laws to encourage hiring and create 11 million new jobs by 2030, and for wage increases to be linked to productivity, proposals opposed by the unions.
The rand weakened 0.9 percent against the dollar to 8.5511 by 10:45 a.m. in Johannesburg, erasing the gain since Dec. 17, the day before the ANC election results were announced. The yield on the government bond due in March 2021 fell 14 basis points over the same period to 6.34 percent, the lowest on record.
The ratings companies said the government needs to tackle the high jobless rate as it faces rising anger among poor shantytown residents over a lack of housing, water and other services. South Africa had a record 113 township protests in the first seven months of the year, according to Johannesburg-based research group Municipal IQ.
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