As Leadership Vote Looms, Four Scenarios for South Africa’s ANC

JOHANNESBURG (Capital Markets in Africa) – South Africa’s ruling African National Congress is due to elect a new leader next month and the race is proving to be one of the most hotly contested and divisive in the 105-year-old party’s history. The front-runners to succeed President Jacob Zuma are his deputy Cyril Ramaphosa and Nkosazana Dlamini-Zuma, Zuma’s ex-wife and the former chairwoman of the African Union Commission, with ANC Treasurer-General Zweli Mkhize seen as a possible compromise candidate. While it remains guesswork who’ll win, what’s clear is that the outcome will have profound implications for Africa’s most industrialized economy and the continent’s oldest political movement.

Here are four possible scenarios of how the leadership race could play out:

Ramaphosa Wins
After securing control of the ANC by a narrow margin, Ramaphosa faces a dilemma: Does he follow through on his campaign pledge to clamp down on the corruption that’s characterized Zuma’s eight-year tenure and risk widening fissures within the party and alienating some of its top power brokers who benefit from the graft? Ramaphosa could try and prove his mettle and consolidate his grip on power by orchestrating Zuma’s removal as the nation’s president before his second term ends in 2019.

While financial markets are likely to initially cheer Ramaphosa’s victory, he’ll need to move swiftly to revive the moribund economy, rein in government debt and improve the management of state companies to maintain the positive sentiment.

Dlamini-Zuma Wins
Dlamini-Zuma’s victory raises the odds that Zuma, who backed her campaign, will serve out his second term. That prospect is unlikely to go down well with investors, who were banking on an end to years of policy missteps, misspending and inappropriate appointments. A pending Dlamini-Zuma presidency is also likely to further unsettle the markets — on the campaign trail, she espoused a series of populist policies to redistribute wealth and land to the black majority.

There’s a chance that Ramaphosa’s supporters will break away from the ANC should he lose the contest for the top job and form a new political party backed by a number of its top officials, labor unions, and communists. A split could cost the ANC its majority in the 2019 election, setting the country up for an era of messy coalition politics.

Mkhize Wins
ANC bosses in the nine provinces could engineer a victory for Mkhize, who’s positioned himself as a candidate who can maintain party unity. Zuma would probably then stay on as president while the ANC’s new leadership decides what to do with him and determines how Ramaphosa and Dlamini-Zuma should be accommodated in the next administration.

Financial markets and investors would likely go into holding mode, awaiting clarity on economic policy, appointments and the outcome of the next election. Efforts to revive the economy and provide jobs for the army of unemployed may stall, hampering the ANC’s re-election campaign.

Zuma maintains grip on power as ANC vote is delayed
Legal challenges over who gets to attend and vote at the Dec. 16-20 conference could force its delay, which may leave Zuma in control of both party and state. That would be the worst possible scenario for investors, who’ve been looking forward to political clarity. A sell-off of the rand and nation’s bonds is likely, and the country faces an enhanced risk of further downgrades to its credit rating.

Source: Bloomberg Business News