South Africa: Market has its verdict, but still too early to say ‘game over’ – TDS

The ANC Elective Conference suffered severe delays over the weekend related to the accreditation of delegates flocking to the Nasrec Expo Centre in Johannesburg, notes Cristian Maggio, Head of Emerging Markets Strategy at TDS.

Key Quotes

“These delays allowed the voting procedures to start only late on Sunday night, rather than results being announced by then. All the events that have preceded the vote, however, have convinced the market that the final outcome will likely see Ramaphosa’s slate victorious over NDZ’s.”

“The weekend nominations have in fact left only two candidates running for the top post, Cyril Ramaphosa and Nkosazana Dlamini-Zuma. Moreover, the fact that the NEC refused to go ahead with Zuma’s suggestion for consecutive votes—which would have offered more opportunities for lobbying and tactical voting—rather than successive rounds of voting, and the rejection of the idea of two deputy presidents and two deputy secretaries-general, has essentially sunk the possibility of a unity candidate and further strengthened the odds for Ramaphosa.”

“In light of the Court orders last week that banned provincial delegates from attending the Conference, and other exclusions that materialized during the accreditation process, voting delegates are 4,780 instead of the 5,240 expected to vote. Therefore, 2,391 votes are necessary to elect the new President. On paper, Ramaphosa is leading the race with known support of 1,469 verified branch nominations to NDZ’s 1,094. The problem is that delegates may change their vote in the secrecy of the ballot and/or not to stick to the indications provided by their provincial branches. Therefore, any delay in voting procedures allows for further bargaining and increase uncertainty.”

“Around 10:00 am London time, the voting procedures were finally concluded and the counting started shortly after. A few tens of thousands of ballots have to be counted, which means the official results may be communicated over the next few hours. The market is waiting to see what it is already anticipating: Ramaphosa and his slate winning a large majority. Rand and bonds have moved to levels that we estimated to be compatible with a resounding victory of Cyril. The risk is that the market has already moved too far ahead of itself, and downside risks now are huge if things don’t go exactly as expected.”