South African Markets Soar Amid Ramaphosa’s Renewed Presidency
Johannesburg, South Africa – In a remarkable display of market optimism, South Africa’s currency and stock market witnessed significant gains following the inauguration of Cyril Ramaphosa for his second term as the nation’s president, thanks to a newly formed power-sharing agreement with the opposition Democratic Alliance (DA).
The Johannesburg Stock Exchange (JSE) experienced a robust rally, surging 1.2% on Wednesday, adding to a 3.5% rise on Tuesday. Investors have hailed the potential stability and practical governance promised by the coalition between the African National Congress (ANC) and the DA, underscoring their confidence in South Africa’s political and economic future.
The South African rand rebounded sharply, peaking at R17.9 against the US dollar. This advance reverses the post-election losses that followed concerns over a possible alliance between the ANC and radical factions, such as the Economic Freedom Fighters (EFF) or the uMkhonto weSizwe (MK) party.
“We saw a massive bounce,” commented John Biccard, portfolio manager at London-based Ninety One. “We’ve had pretty much the best outcome for the markets that you could have hoped for.”
For the ANC, the landmark agreement marks a crucial pivot. After losing its parliamentary majority for the first time since Nelson Mandela’s historic presidency ended apartheid three decades ago, the party circumvented the investor-anxiety-inducing scenario of partnering with the EFF or MK, both of which have advocated for aggressive nationalization policies, including a radical restructuring of the South African Reserve Bank and potentially unconstitutional reforms.
The DA’s new role within a government of national unity is expected to manifest soon, with several cabinet positions likely to be allocated to its members. This inclusion is predicted to bring a pro-business sway to policy-making, much to the satisfaction of the business community.
Busi Mavuso, the chief executive of Business Unity South Africa, representing major corporate interests, stated, "The power-sharing deal has sparked confidence among businesses and investors that the country has a historic opportunity to make a big leap forward."
This surge of market confidence marks a notable rebound from years of stagnation and investor withdrawal, attributed to stalled economic reforms and chronic power outages. However, the electoral outcome and a remarkable streak of 84 days without load-shedding have rejuvenated optimism.
JPMorgan analysts upgraded their outlook for South Africa’s market to “overweight”, citing the power-sharing arrangement as a best-case scenario for South African politics. "We believe stocks should rally further," they projected in a recent report.
The historical backdrop of South Africa’s Union Buildings, where Ramaphosa delivered his address, serves as a poignant reminder of the nation’s journey. Once dominated by apartheid architect Hendrik Verwoerd, the site later symbolized freedom with Nelson Mandela’s democratic victory in 1994. Ramaphosa acknowledged the public’s impatience with political discord, pledging a renewed focus on unity and effective governance.
Despite the optimistic signals, analysts note potential pitfalls. The coalition between the ANC and DA, built on a tentative statement of intent, faces hurdles. A note from S&P Global Ratings warned of the uphill battle to revive economic growth and maintain fiscal discipline within the new coalition’s framework, stressing "vast ideological differences" that could complicate governance.
Jonny Steinberg, a South African author affiliated with Yale’s Council on African Studies, highlighted intra-party tensions: “Many ANC officials view the DA as the local proxy of international right-wing forces." He cautioned that influential figures like Jacob Zuma and EFF leader Julius Malema retain significant disruptive potential.
Nonetheless, the establishment of a coalition government under Ramaphosa marks a significant moment in South Africa’s evolving political landscape, promising a blend of stability and reform in one of the continent’s largest economies.
Sources: Financial Times, Ninety One, Business Unity South Africa, JPMorgan, S&P Global Ratings, Jonny Steinberg.
