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Investors will liken SA, Kenya
03/01/2008 13:17 - (SA)
Evan Pickworth
Johannesburg - As Kenya burns in post-election turmoil, leading SA economist Chris Hart says investors will probably be drawing some concerning parallels ahead of SA's own election in 2009 and the corruption trial of new ANC president Jacob Zuma set for August.
"What Kenya does is highlight the risk of Africa," he points out.
He adds that the rand is possibly a "highly vulnerable" currency due to the political risk, as well as the current account deficit and slower growth.
"I can't help thinking that the Zuma supporter is a bit mob-like - it
was especially apparent at his rape trial and in other areas. There is a concern around that mob-like behaviour," says Hart.
"The other concern is the economic part - the view that a mob is more collectivist and anti free market - that is the biggest concern," notes Hart.
Kenya
"I hope people go back to work to calm down in Kenya - but I have a suspicion they will not give up until they have power."
Hart highlights the worst-case scenario: "We've got similar parallels - I suspect one riot over the trial and you immediately start drawing parallels, which is a concern. That is the worst case scenario."
"We have our own threats to the rand anyway via the current account deficit. Usually you have a current account deficit and something else, like a budget deficit. Well we don't have that, but what we do have is a slowing economy where the deficit is not going to be sustained by high growth - plus we have the political uncertainty. I would suggest the rand is a highly
vulnerable currency," says Hart.
Hart adds that SA's economy seems to have gone from being in a virtuous cycle to being in a "vicious" one.
As for the Kenyan shilling, he says that while some commentators may have called for an opportunity on the shilling at the weaker levels, the rand could move weaker while the shilling is vulnerable.
"There is no reason the shilling can't lose a bit more. It depends on the extent of the contagion. What Kenya does is highlight the risk of Africa. Can SA withstand the scrutiny to any small detail at this stage? We have a convergence of horrible factors occurring now," emphasises Hart.
Kenya's finance minister, Amos Kimunya, has said the shilling is "within control".
Hart says that Kenya may go forward with a government of national unity via a compromise between the competing factions of Mwai Kibaki and opposition leader Raila Odinga - who is accusing Kibaki of rigging his re- election. However, he adds that this is no guarantee of stability, as supporters would still want their particular candidate in power.
An opposition rally is taking place today and more fears of rioting are rising.
Highlighting just how quickly the rot can set in after an African election, Fortune magazine had decreased their risk profile for Kenya just prior to the weekend election. The magazine felt at the time the re-election of Kibaki would "help
maintain political stability and pro-market economic policies in East Africa's most promising frontier market".
Foreign investors who read that will now be very concerned as Kenya did indeed look so promising by all accounts. The about-turn in those views may now stretch further afield when they relook Africa, SA, and leaders with supporters prone to public outbursts and outrage.
SA's National Prosecuting Authority began the new year with a
bang on Wednesday by issuing a statement saying that it has reached the decision to prosecute Jacob Zuma after careful consideration of the facts and evidence. The charge sheet includes money laundering, fraud and racketeering charges.
- I-Net Bridge
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