Ramaphosa’s Win Boosts South African Policy Prospects, Moody’s Says

  • Narrow victory margin may delay economic reform agreements
  • Three of the top six positions in ANC went to Zuma backers

Cyril Ramaphosa, South Africa's deputy president and newly elected president of the African National Congress party, speaks during the 54th national conference of the African National Congress party in Johannesburg on Dec. 18, 2017.

Photographer: Waldo Swiegers/Bloomberg

Cyril Ramaphosa’s appointment as leader of South Africa’s ruling party raises the chances that the country will adopt credit-positive policies, but his narrow margin of victory could delay agreement on key reforms needed to boost the ailing economy, Moody’s Investors Service said.

Ramaphosa won 52 percent of votes to 48 percent for Nkosazana Dlamini-Zuma, the tightest margin since Nelson Mandela led the ANC to power in 1994 after the end of apartheid. While the outcome is a blow to President Jacob Zuma, who backed his ex-wife to succeed him, the appointment of Zuma backers to three of the top six positions in the organization “will likely complicate policy negotiations,” Moody’s said in an emailed statement Tuesday.

Africa’s most industrialized economy expanded at an annualized rate of 2 percent in the third quarter after emerging from a recession, and the country has loosened its debt targets as it deals with tax shortfalls. S&P Global Ratings and Fitch Ratings Ltd. cut the country’s debt to junk this year, and a reduction of rand bonds by Moody’s could trigger an exclusion from Citigroup Inc.’s World Government Bond Index.

“The simple prospect of a new approach to any of these increasingly debilitating weaknesses in South Africa’s credit profile could in itself boost business confidence and support a pick-up in investment and growth,” Moody’s said. “In practice, Mr. Ramaphosa’s narrow victory complicates reaching consensus and leaves room for delays.”

Reforms Planned

Ramaphosa, a 65-year-old businessman and trained lawyer who has become one of South Africa’s richest black citizens, endeared himself to investors with pledges to carry out market-friendly reforms and curb corruption within government. Dlamini-Zuma unnerved them with calls for “radical economic transformation” to redistribute wealth to the black majority, which they feared would lead to fiscal recklessness.

Slack consumer demand and domestic political turmoil have weighed on the economy, battering business and consumer confidence. S&P cut the nation’s rand debt to junk on Nov. 24, saying that public finances had deteriorated with no prospect of immediate improvement. Moody’s put its assessment, which is at the lowest investment grade, on review for downgrade. The review is expected to run until after the 2018 budget announcement in February, it said.

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