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South African markets jittery as ruling party debates president’s future

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JOHANNESBURG — The rand and South African sovereign bond prices ticked higher on Friday, while stocks fell, after ruling party officials failed to reach a conclusion over whether President Cyril Ramaphosa should stay in power after an inquiry found evidence of misconduct.

Ramaphosa’s political future still hangs in the balance, with the national executive of his governing African National Congress (ANC) party set to reconvene to discuss the report before Dec. 6, when parliament will debate it.

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Senior figures considered to be allies of the president closed ranks around him on Friday. Finance Minister Enoch Godongwana told Reuters he thought Ramaphosa should continue in his job, doing whatever he could to defend himself.

Thursday’s steep market sell-off relented on Friday, although assets pared gains later in the day.

The rand was up 0.36% at 17.4875 against the dollar, although it had strengthened to 17.265 earlier in the day.

“Our base case is for policy continuity over the medium term that will likely limit the risks to macro (and fiscal) policy,” wrote Goldman Sachs economist Andrew Matheny in a client note.

He said the call is based on policy proposals presented at the ANC policy conference “and underpinned by our expectation that any new party leadership … will have views on economic policy that are not likely to differ significantly from those of the current administration.”

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Matheny added that a drawn-out leadership crisis could further weigh on the South African currency.

On Thursday, the rand plunged more than 4% at one stage, after news website News24 said Ramaphosa was likely to resign within hours, before cutting losses to end about 2% weaker.

Rand volatility gauges have also soared, especially the 1-week gauge, which on Thursday and earlier on Friday was at its highest levels since the peak of COVID fears in early 2020, before falling back slightly.

“Given that (Ramaphosa is) not resigning immediately … plus, given that he has a more business-friendly profile than many other(s), markets are pinning their hopes on him staying in office,” said Per Hammarlund, chief emerging markets strategist at SEB in Sweden.

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South Africa’s bonds also staged a partial recovery, but lost some gains later in the day.

Longer-dated sovereign dollar-denominated bonds that had fallen furthest rebounded the most. At 1522 GMT, the 2047 maturity was up 1.1 cents to 73.986 cents in the dollar, Tradeweb data showed.

The local 10-year benchmark also recovered some of Thursday’s losses, which were the biggest since the COVID market rout of early 2020. The yield closed down 13.5 basis points at 10.805%, having fallen as much as 33.5 bps during the day.

Shares in Johannesburg closed lower, however, after having risen slightly in the previous session. The all-share index and the top 40 index were down 0.9%. An index of bank shares jumped 1.4% after falling over 8% on Thursday.

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Consumer goods company Premier Group shelved its planned Dec. 8 listing on the stock market, with owner Brait Plc citing capital market conditions, particularly over the previous two days.

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“I want to tell the markets that people must be calm and be relaxed … the macroeconomic framework remains,” finance minister Godongwana said in a phone interview with Reuters.

He said that if Ramaphosa were to resign Godongwana would stay in his job. “If the new president wants my service, I will continue,” he added.

Ramaphosa’s spokesperson had told reporters on Thursday the president still had “all options on the table” over the panel report, and was still consulting a broad range of people over the next steps.

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The panel investigated allegations that thieves found and stole millions of dollars of cash stuffed into furniture at Ramaphosa’s game farm in 2020.

The theft, which only came to light in June, has raised questions about how Ramaphosa, who came to power on the promise to fight graft, acquired the money and whether he declared it.

The president has said a much smaller amount of money – the proceeds of game sales – was taken. He has denied any wrongdoing and has not been charged with any crimes.

On Friday, ANC Chairman Gwede Mantashe told public broadcaster SABC that the party had a responsibility to reassure markets and society, pointing to the rand plunge of the previous day as a reason for Ramaphosa to stay on.

“What concerns investors are when institutions are being eroded, and I think South Africa has shown time and again that the judiciary remains quite robust, our parliament remains quite robust,” said Lumkile Mondi, an economics lecturer at the University of the Witwatersrand.

“Hence, (the process) that has put the president in this position that is very unpalatable, not only for investors, but for all of us because it creates uncertainty.” (Reporting by Alexander Winning, Rachel Savage, Nqobile Dludla, Catherine Schenck and Olivia Kumwenda-Mtambo in Johannesburg, Marc Jones in London, Shreyashi Sanyal in Bangalore and Rodrigo Campos in New York; Editing by Susan Fenton and Nick Zieminski)

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