The best outcome for the ANC and South Africa – any why we probably won’t get it

As the ANC’s elective conference in December draws closer, political campaigns and bids for the presidency are coming through with greater intensity – while analysts and economists try to predict the outcome.

According to research analyst at Nomura, Peter Attard Montalto, the best outcome for the ANC would be a united party, electing a leadership that all sides of the ongoing factional war will be happy with.

This would prevent the deepening divisions or even a split within the party, which would spell chaos for the country as a whole.

However, the analyst conceded that it may already be too late for that scenario – as divisions and mistrust now runs deep within the party – even though this is what both ‘main’ sides of the factional battle ultimately want.

In a market update to investors on Tuesday, Attard Montalto said that negotiations between the pro-Zuma and anti-Zuma camps of the ANC have been ongoing since around Easter, and have intensified in recent weeks.

“We believe there is some agreement on the structure of the ANC leadership and how the ANC would reform and shape itself after a unity slate was elected, including possibly an exit strategy for President Zuma as part of such a single-slate compromise,” the analyst said.

“The question, however, is which personalities go where? Factionalism and distrust are simply too deep. As such there is no real agreement at all – simply a theoretical framework.”

So what will happen?

With the first – and possibly best – outcome apparently off the table, Attard Montalto pointed to other possible outcomes, particularly where the ANC’s slate politics comes into full play.

With no unity in the party, the default collapses back to a dual-slate proposition – with two teams (ostensibly led by Cyril Ramaphosa and Nkosazana Dlamini-Zuma) contending for the presidency.

According to Attard Montalto, there are currently around seven full-declared candidates vying for the presidency, with many other “shadow” candidates in the background who may or may not throw their names into the hat.

Dual-slate bidding involves a lot of money for campaigning and vote-buying, and will increasingly drive factionalism, forcing members in the ANC to choose sides. Until the slates are fully known and declared, many will keep their heads down and hope for a unified option, the analyst said.

Neither candidate – Ramaphosa, nor Dlamini-Zuma – are completely liked or supported by their own teams, Attard Montalto said, with a ‘unqualifiable’ risk present that either or both candidates could be replaced.

“We see a higher probability of Dlamini-Zuma falling victim to this than Ramaphosa. After the recent no-confidence vote the name of Speaker Mbete has increasingly been raised as an alternative possibility within the Zuma faction,” he said.

The analyst said that Nomura’s baseline is that the pro-Zuma faction will emerge as the winners – purely because Zuma cannot afford to lose, and may adopt a “whatever it takes” approach to ensure victory.

Thus there is also a risk that the elective conference may not happen at all, if Zuma feels his faction is at risk of losing – a point that Attard Montalto feels is being largely ignored by the markets.

Market reactions

According to Attard Montalto, the markets remain “too optimistic” that things will change in South Africa through December.

“We also think the market is still attaching too much upside (in structural and economic terms) to a Ramaphosa Presidency.”

The analyst said that more investors are coming over to the reality that there would broadly be a holding of the status quo under Ramaphosa in the event that he wins – because he would need the support of the pro-patronage faction to even get there.

The analyst said that investors are increasingly looking to December to hedge and trade – but conviction remains low.

“Put simply, we think investors are finding the political narrative too complex to trade with any certainty or size,” he said.

Read: Mbete could replace Dlamini Zuma as the leading presidential candidate