South Africa’s Ramaphosa May Ease Investor Concerns: S&P

The election of Cyril Ramaphosa as deputy president of South Africa’s ruling African National Congress will probably help ease investor concerns about government policy, according to Standard & Poor’s.

While the party avoided any shift toward a “populist” stance at its conference this week and rejected nationalization of mines, it has to be more specific about how it will tax mining companies, Christian Esters, a credit ratings analyst at S&P, said by phone from Frankfurt today. South Africa remains on a negative credit rating outlook, he said.

“You could argue that it should create some comfort for investors that the ANC policies will be mindful of business needs,” he said about Ramaphosa’s election. “The mining industry is probably still looking for more clarity on the tax regime and regulation.”

South Africa’s credit rating has been cut twice this year as the slowing economy, rising unemployment and strikes fueled investor concern that the government would boost spending on grants to the poor, widening the budget deficit. S&P and Moody’s Investors Service have a negative outlook on BBB and Baa1 ratings, respectively. Both are investment grade.

Questions Remain

The ANC re-elected President Jacob Zuma as party leader and picked Ramaphosa, the second-wealthiest black South African, as his deputy this week. Delegates at the conference resolved to consider raising taxes on mining companies and increase “strategic state ownership” in the economy.

Moody’s won’t make a decision on the credit rating “until there is greater clarity” on some of the policies that were adopted, Kristin Lindow, sovereign-rating analyst, said in an e-mailed statement.

“In particular, questions remain as to how changes to mining taxes will operate in practice,” she said. “It is still not clear what form government intervention in these matters is supposed to take.”

The rand weakened 1 percent against the dollar to 8.5605 by 3 p.m. in Johannesburg, erasing gains since Dec. 17, the day before the ANC elections were announced.

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