Zuma must be careful - Moody's

These comments are set against a background of high volatility in the global financial markets and heavy investor nervousness.

Add to this the resignation of state president, Thabo Mbeki, yesterday and heightened expectations his likely successor, Jacob Zuma, will forge new ANC leadership aimed at tackling the problems of the poor, and there's a situation where investors will be adversely sensitive to the slightest shifts away from established party economic doctrine, Moody's says.

Senior vice-president and lead sovereign analyst for Moody's, Kristin Lindow, says the ANC's decision to recall Mbeki "ushered in fresh uncertainty in the political sphere".

While there's a chance Mbeki's departure will bring new stability with the potential to end a long-running and bitter inter-party conflict within the ANC, there are concerns.

The key question for Moody's is whether the ANC's leftist allies, and the candidate for state president they fervently support - ANC president Jacob Zuma - will implement adverse changes in the carefully-crafted economic framework once he becomes president.

"The prudent fiscal stance, inflation targeting, and exchange rate policy have been generally coherent and have improved the country's creditworthiness in recent years," says Lindow.

Doubts raised

In the context of the current international economic upheaval, the new ANC leadership needs to be vigilant about maintaining certainty and consistency in the realm of policy, she says.

Doubts have been raised, however, about reassurances the new ANC leadership has given about policy continuity with the balance tilted to a more populist direction, says Lindow.

"At the same time Zuma has allowed lower income South Africans' expectations to get unrealistically high about the ability of his incoming government to resolve the country's massive socio-economic problems as well as to more effectively handle some of the areas in which the Mbeki administration is seen to have failed, such as crime, poverty, and job creation," she says.

Managing overblown expectations will be necessary to maintain future political stability, particularly with the precedent now set for removing a sitting president.

Lindow noted that the procedures followed in having Mbeki resign were "fully constitutional" and that several leaders, including Mbeki, have committed to a smooth transition according to constitutional rules.

"Also important is that most of the cabinet, including economic policymakers, will likely remain in place in a transition government, at least until a new government is formed after parliamentary elections that will be held within the next several months," says Lindow.

Nevertheless, the bottom line is that Mbeki's ouster, she believes, heralds "a fresh, more uncertain chapter" in the relatively new democracy.

- Fin24.com