Guest columnist Peter Attard Montalto of Nomura was spot on in his Manguang voting predictions:
Note: President Jacob Zuma has secured a second term at the helm of the ANC and Cyril Ramaphosa
has been elected his deputy.
THE nominations have been released and in a last-minute surprise move Kgalema Motlanthe
has withdrawn his nomination (that he said he previously accepted) for deputy president of ANC (ie to continue in his current job) and therefore will only be put to a vote on the presidency (which we think he does not have enough support for and will lose) and as a member of the NEC (which we think he will easily get but removes him from the top six key positions).
Motlanthe's campaign to simply leave things up to the will of the delegates seems to have failed, and it is now clear that he did not accept some deal to remain in the top six with Zuma.
This is of course a great shame but a consequence of his lack of campaign style and those who associated themselves with him (the anything but Zuma, or ABZ, camp).
The deputy presidency nominations are therefore Mathews Phosa
, Cyril Ramaphosa
and Tokyo Sexwale
, though we expect Phosa and Sexwale to split the ABZ vote and as such Ramaphosa to win easily.
The most interesting contest therefore is for secretary general, where Gwede Mantashe
and Fikile Mbalula
Mbalula is definitely the firebrand ABZ candidate and sympathetic to Malema (who is separately asking for the conference to over turn his membership ban of the ANC) and is also pretty popular. Gwede Mantashe
is more left-wing but equally balanced and generally highly regarded (including by us in our own interactions with him). The race should be close but we see the Zuma camp as being able to triumph.
We should also consider the prospect that Motlanthe will be recalled from deputy president of the Republic and replaced by Ramaphosa before the election in 2014, though given the time taken for him to transition this isn't certain.
Such a move might lead to a short run market fillip though.
Remember, we are somewhat sceptical of the impact Ramaphosa can make though the market may interpret him plus Zuma backing the national development plan (NDP) as being a real positive.
A few things: while it is certainly welcome that the NDP is endorsed, it should be no surprise.
Firstly, most of it is so long term it need not have much political impact short run, secondly other counter measures are possible to satisfy Cosatu that are counter to NDP.
Finally, politically given Polokwane set up the NPC and with the Democratic Alliance and others endorsing it, the ANC simply had to. Overall I'm not sure this solves any of the issue of conflicting policy short term with NDP and NGP. There is still too much conflict with line ministries to get easy or fast NDP implementation.
While Ramaphosa was the deputy chair of the NPC, we still believe his room for manoeuvre in government will be very limited given the tripartite alliance and other likely policy changes at this conference including on labour issues.
What we may have here then is a positive PR boost plus another investor friendly voice in cabinet, but little real change on the ground and in action.
It therefore falls to policy now largely to affect the market reaction of the outcome of the conference.
We had comments from Deputy Finance Minister Nhlanhla Nene
trying to manage expectations about a mining tax.
These comments are important and show how seriously the ANC is thinking about additional taxes on the mining sector, regardless of the impact on rating, etc. For me this shows something will happen; it's just a case of language used and if that's enough for a real market and rating agency reaction (less certain).
Here then is a rough and ready guide to possible market reactions:
- the good: no mining tax and resource nationalism seen as not much different from current mining policy, minimal other changes. Ramaphosa victory.
- the neutral: our base case. Only small changes and medium run more than short run impacts on economy, resource nationalism more actively defined but still sparse details on taxes, all combined with Ramaphosa victory.
- the negative: more aggressive inclusion of resource nationalism including taxes plus other wider policy changes especially around labour laws. Ramaphosa loses.
I think in general the rand can be volatile and trade weak speculation on tax news, stirred up by rating agency chatter after and Fitch downgrade in q1, though in short run at least the rand responding perhaps both to global sentiment and Ramaphosa victory prospects - so some scope for this to be paid back.
On rates its probably difficult to see much reaction in front end at all, only more juice in longer end lower or higher on more positive/negative outcomes.