Guest columnist Peter Attard Montalto of Nomura presents his views on Manguang and beyond:
THE likely retention of the Zuma status quo is the problem but the alternative (anyone but Zuma) looks no better.
One event we have mentioned and referenced more than any other in the past year is “Mangaung”. The importance of this five-yearly elective conference of the ANC cannot be underestimated and should have far-reaching ramifications for policy, the economy, the budget and markets.
However, these implications may be less than obvious if our baseline is correct - that the broad sweep of economic policy will remain the same, as broadly will the ANC leadership under President Jacob Zuma despite his unpopularity, thanks to the lack of any campaign of note from his opposition.
However, this status quo is suppressing potential growth and leading to increasing socioeconomic problems as has been seen this year in the labour market.
The alternative may well be worse, with an investor-friendly president in the shape of Kgalema Motlanthe but little backing from other leaders of the ANC.
Future succession battles look equally probable under both leaders, driven by the quest for power and influence even as the ANC slowly loses popularity more generally given its inability to deliver services and boost growth and development.
• There appears to be a battle over the future leadership and direction of the ANC between the Zuma camp and the “anyone but Zuma” (ABZ) camp – a slate led by Zuma and another that is opposed to him and willing to back anyone but him, most likely Deputy President Motlanthe.
• We think this battle is less significant than it seems thanks to a poor campaign by ABZ and little that holds them together. The Zuma camp by contrast has a much more aggressive operation.
However, the example of Zuma toppling Mbeki in 2007 teaches us to be cautious.
• We believe Jacob Zuma will be re-elected leader.
• A quantitative assessment based on branch and province views also supports this, albeit by a moderately close margin of 54% to 46%.
• There is a possibility that Motlanthe falls by the wayside in favour of Cyril Ramaphosa as deputy president under Zuma, and there may even be some agreement for Ramaphosa to become president in 2014.
• We believe Zuma has made some policy-related deals with Cosatu in order to secure their backing, which while not decisive would still be key to his victory.
• We see subtle wider policy changes coming, with mining and labour the focus.
• We think there would be issues with either a Zuma or Motlanthe victory, though the latter could be particularly unstable given the people backing him.
• However, continuation of the status quo would involve further erosion of competitiveness and suppressed potential growth that would lead to downgrades in our view.
• The direct fiscal impacts in the short run will likely be limited but over the medium run could accumulate into a more worrying picture.
• We expect Fitch to downgrade the sovereign in January and see some possibility the other two agencies may go again, depending on the policy outcomes from the conference.