Wednesday night marked the end of an era as former President Jacob Zuma publicly announced his resignation. While the nation for the most part has welcomed this change, it has left many with questions about what happens now.
“Many believed that the ANC’s vote of no confidence, would be needed to start Cyril Ramaphosa’s reign in the National Presidential seat but this was not the case as Mr Zuma believes no name is big enough to split the African National Congress,” stated Gerard van der Westhuizen, dealer at TreasuryONE.
Further celebrations were echoed as the rand rallied to under R11.70 to the Dollar upon his resignation.
“We do however want to highlight one fact, that the currency’s strength could not entirely be linked to the Jacob Zuma’s generosity last night as the dollar took a massive plunge,” explained van der Westhuizen. “The US Consumer Price Index (CPI) figure came out strong but what surprised most were the retail sales for January, which showed the biggest decline in 11 months.”
While the ‘Zexit’ did not rally the Rand as far as expected, we could see the currency hold firm at these levels. This could mean an eventual reduction in inflation and possibly encourage the South African Reserve Bank (SARB) to lower interest rates later this year.
Popular opinion suggests that the resignation of former President Jacob Zuma and the expected accession of Deputy President Cyril Ramaphosa to the Presidency of the country now paves way for better economic prospects.
Professor Raymond Parsons, NWU School of Business and Governance’s economist, agreed: “It marks the end of a period of political and policy uncertainty in which SA sacrificed considerable potential growth. State capture and widespread corruption have sapped SA's economic performance.”
Parsons believes that South Africa’s public finances and those of state-owned enterprises have deteriorated over time. But it is still possible for South Africa to avoid universal junk status if the right decisions are taken in the forthcoming Budget on February 21 to stabilise the country’s public finances and promote growth.
“A credible budget needs to rest on the foundations of new leadership and political stability if the economy is to be successfully turned around,” he says.
The country awaits both the State of the Nation Address (SONA) later this evening and the Budget speech with baited breath, as a new tone for governance is to be set.