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*Correction: This article previously misattributed a quote to RMB Chief Economist Ettienne le Roux saying that the rand would trade at R12/$ in the case of President Jacob Zuma's removal. This has since been corrected.
Johannesburg – The ANC national executive committee (NEC) knew about state capture as far back as 2012, according to an analyst.
Nomura emerging market economist Peter Attard Montalto said in a statement on Tuesday that the recent motion of no confidence against President Jacob Zuma is just the NEC’s way of responding to the public backlash following state capture reports.
Zuma survived the vote held this past weekend and the rand, which had strengthened on the back of rumours of his ousting, weakened to over R13/$ after the ANC reaffirmed that Zuma would remain president.
READ: Zuma says foreign agents behind attempt to remove him – Bloomberg
Montalto explained that the motion of no confidence was just an effort to appease the public and that it was unlikely Zuma would be removed. “We think the NEC has been fully aware of the extent of state capture, how various participants are involved in different ways and the impact on government, the state and the ANC.
"The NEC has been aware since 2012, or even starting from 2010 as the narrative started to build,” he said.
“It is this issue of who knew what and when that President Zuma wraps effectively around the NEC and prevents action to remove him,” he added.
Montalto explained that although the market views Zuma as a “lame duck” who may have less support within the NEC than before, the fact that he survived two votes of no confidence shows that he is not weak.
Montalto said the NEC is “sticky” and that it can't be “shocked” about any new information coming to light regarding the president, so it is unlikely that members would switch sides. Furthermore, those in the Zuma camp would not “find a home” in the anti-Zuma faction.
State capture probe a fig leaf
He added the NEC’s decision to support a probe into state capture is merely a “fig leaf”, as the commission to be set up would only make a ruling in several years.
READ: ANC NEC: Molefe must leave Eskom, but new role must be found – sources
The NEC’s call to have the reinstatement of Brian Molefe as CEO of Eskom rescinded may be surprising. said Montalto. However, the NEC may be seeking more stability.
“This does not mean that Mr Molefe will necessarily leave soon and possibly this is kicking things into the long grass, but internal disagreements are an issue to watch,” he said. This is based on reports that the ANC does not want Molefe’s skills set to be lost.
Market reaction
The rand opened at R12.96 on Tuesday morning and was trading at R13.14/$ by 13:00. Montalto attributed its loss of gains over the weekend to the market overplaying potential positives.
“We expect the market to still get ‘over-excited’ about the parliamentary no-confidence vote and associated secret ballot ruling from the Constitutional Court.” Montalto said that such a vote would not succeed, even if as many as 80 ANC MPs wanted to vote against Zuma.
“Threats, security services, collectivism, instruction from the caucus and NEC mean that such a vote will not succeed in our view, under either secret or open ballot,” he said.
Montalto said it is possible Zuma may take action against those opposing him. News24 reported that Zuma told detractors within the ANC not to "push him too far”. “We expect the second half of the year to get 'dirty' in terms of the skeletons being let out of the cupboard,” he said.
ALSO READ: Rand could rally to R11.50/$ on 'Zexit' - analyst
Colin Coleman, head of investment banking of Goldman Sachs sub-Sahara Africa, had forecast that the rand would trade at R11.50/$ when Zuma’s term as ANC president ends in December. However, he said the risk of another credit downgrade would see it settle at R14/$.
Ettienne le Roux, chief economist at Rand Merchant Bank, similarly forecast the rand to trade between R12/$ and R15/$, the worst-case scenario would be following another credit downgrade, he said. The rand would strengthen following improvements in the global economy and with more capital flows to South Africa.
