Rand gains stall on uncertainty over Ramaphosa

Cape Town - After almost touching R12.55 to the dollar on Monday on news that Deputy President Cyril Ramaphosa was elected the new ANC president, the rand weakened somewhat in early trade on Tuesday. 

By 09:26 it was trading at R12:84 to the greenback, a rate last seen in early September. 

The local unit, which had been strengthening throughout Monday on positive sentiment that Ramaphosa would be the new ANC leader, rallied to a nine-month high of under R12.60 at around 19:00 on Monday. 

This was when news broke that the deputy president received a total of 2 440 votes in the ANC leadership race, compared to 2 261 votes for Nkosazana Dlamini-Zuma.

But shortly after the full slate of the Top 6 ANC officials was announced, the local currency started to weaken. 

Geoff Blount, managing director of BayHill Capital, on Monday evening predicted that the rand would weaken on Tuesday. He noted that markets had appeared to price in a victory for Ramaphosa and his allies, rather than a “hung” NEC.

In addition to Ramaphosa, the other members of the ANC Top 6 are David Mabuza, deputy president; Ace Magashule, secretary general; Jessie Duarte, deputy secretary general; Gwede Mantashe, national chairperson and Paul Mashatile, treasurer general.

Magashule, Duarte and Mabuza are seen as close to Dlamini-Zuma and her ex-husband President Jacob Zuma. 

"Hence, we expect the rand and the domestic-facing stocks to weaken [on Tuesday] after their recent rally. Some of the euphoria will be repriced out of the market and it will retrace some of its steps as the reality sinks in," said Blount on Monday evening. 

'Uncertainty over victory'

Gerrit van Rooyen, an economist at NKC African Economics, said there is uncertainty over how how positive this victory has really been.

"Given that three Dlamini-Zuma allies are in the top six and that the 80-member national executive committee still has to be elected, it is not at all clear whether Ramaphosa will have the support to clean up corruption in the ANC or to remove Jacob Zuma as president of the country, which is what many market-participants were hoping for," he said.  

Phillip Pearce, dealer at TreasuryOne, noted that that Ramaphosa only beat Dlamini-Zuma by only 179 votes in a "ridiculously" close race. "He takes over a profoundly divided party and makes up a Top 6 that will be at odds with each other," he said. 

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