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ANC leadership battle a risk to SA economy - Credit Suisse

Jan 26 2017 17:05
Lameez Omarjee

Johannesburg – The year 2017 will most likely be dominated by rising political tensions ahead for South Africa, says financial services company Credit Suisse.

The leadership battle within the ANC as it approaches its 105th anniversary, together with the on-going battle to control National Treasury and rumours of a cabinet reshuffle are among the potential risks to the economy.

In a report by Credit Suisse, researchers outlined seven political, judicial and legislative events that could generate risks in the first quarter of the year.

1. Parliament revisits FICA

The Financial Intelligence Centre Amendment (Fica) Bill is once again under parliamentary scrutiny.

The amendments to the bill are necessary for South Africa to comply with international regulations, and the country is already “overdue” in its implementation, stated the report.

The amended bill would empower banks to inspect politically exposed persons (PEPs) and prominent individuals. This was seen when four major banks in South Africa, Absa, FNB, Nedbank and Standard Bank closed the accounts of the Gupta family’s Oakbay Investments and its subsidiaries, following revelations of suspicious transactions and the family’s status as PEPs.

READ:  ‘Court capture’ crusader says FIC Bill is in breach of Constitution

Delaying the passing of the bill would be potentially negative for fixed investment and the country’s credit ratings, stated the report.

2. SONA

President Jacob Zuma’s State of the Nation Address (Sona) could include initiatives to boost “radical” economic transformation. The ANC’s National Executive Committee (NEC) meeting prior to this will provide input for Sona.

3. National Budget Speech

Finance Minister Pravin Gordhan may announce that tax rates will increase in the national budget speech to be delivered on 22 February.

“Gordhan’s opponents, within the ANC, will likely criticise Gordhan for protecting ‘white monopoly capital’, while not doing enough to support state-owned enterprises,” stated the report.

Gordhan's position has strengthened since fraud and theft charges against him were dropped. Treasury’s role in avoiding a rating downgrade to sub-investment grade last year was crucial.

4. A Cabinet reshuffle

It is possible that a Cabinet reshuffle could happen after the budget speech, stated the report.

“Zuma would be looking to strengthen his position within the cabinet and continue to influence the process towards the election of a new party leader in December 2017.”

The probability of a reshuffle increased following the ANC’s last NEC meeting in November last year. A number of ministers and members called for Zuma to step down as president.

READ: Cabinet reshuffle: Zuma thinks of comeback for Dlamini-Zuma 

There are rumours that current African Union Chairperson Nkosazana DlaminiZuma could return to the Cabinet, replacing Gordhan as finance minister.

5. Gordhan vs Oakbay Investments

The fight for Treasury continues on March 28 when the High Court will hear arguments in the application submitted by Gordhan last year. Gordhan is seeking a declaratory order that there is no legal requirement for a finance minister to have to intervene in bank-client relationships.

The case will reveal details why major South African banks closed the accounts of the Gupta-owned Oakbay Investments in 2016.

Oakbay Investments submitted its answering affidavit on January 20.

READ: Oakbay: Cloud hangs over 72 'suspicious' transactions

6. Zuma’s corruption charges

The Supreme Court of Appeal (SCA) agreed to hear Zuma's application for a discharge of the 783 corruption charges against him.

“This event will likely have a significant impact on Zuma’s power and influence within his party,” stated the report.

If Zuma loses the appeal at the SCA, then he will likely take the matter to the Constitutional Court.

If he loses that appeal, then the National Prosecuting Authority (NPA) is obliged to bring the case to court. This will likely coincide with the leadership contest in the ANC, which Zuma will try to influence.

7. National Minimum Wage negotiations

Negotiations within the National Economic Development and Labour Council (Nedlac) on an a national minimum wage will resume. Deputy President Cyril Ramaphosa has been chairing these negotiations and a successful outcome will be important for his prospects of becoming president of the ANC.

If an agreement is finalised between labour, government and business, then amendments to legislation will be processed through parliament.

READ: Proposed R3 500 minimum wage sparks heated debate

Other major events to look out for in the remainder of the year include South Africa’s first credit rating review by Moody’s, on 7 April. Moody’s, Fitch and Standard and Poor’s (S&P) have all placed South Africa’s rating on a negative outlook.

S&P’s review will follow on June 2. Fitch’s review is scheduled for June 30. The risk remains high that Fitch and S&P will act on both their outlooks to downgrade after giving South Africa a “breather” last year.

The judicial enquiry into state capture is scheduled to be concluded on May 31. Senior politicians, including the president may be called to testify. 

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