Zuma’s narrow victory gives economists hope


President Jacob Zuma's narrow victory in a no confidence vote on Tuesday has given some economists reason to hope, Fin24 reports.

Professor Jannie Rossouw, head of the School of Economic and Business Science at Wits University pointed out that the narrow margin of victory indicated that the president's grip on power was slipping, giving the country "a glimmer of hope" it hasn't had in years.

"Some ANC MPs voted against him, which is indeed a positive development. His grip on power in the party is definitely slipping. Our future looks better tonight than it has looked anytime in the past eight years," Rossouw told Fin24.

The fact that ANC MPs voted against him also indicated that Zuma's influence in the party's succession battle at the December elective conference has also been eroded.

Founder and chief executive of Cannon Asset Managers, Adrian Saville, agreed with Rossouw on the significance of the president's margin of victory, saying that a "meaningful number" of ANC members who voted against him does indicate that he is losing his iron grip on the party.

Zuma narrowly won the no confidence motion 198 to 177, with nine MPs abstaining. Around 30 ANC members are believed to have voted against him.

Saville, however, pointed out that removing Zuma from power would not have solved the country's economic problem, as its much bigger than a person.

"I do not think replacing Zuma leads to immediate recovery or restoration, the problem is much bigger than the leader of the ANC, it is a South Africa problem," Saville said.

Regarding the rand's performance in the wake of the outcome, Tumisho Grater, economic strategist at Novare Actuaries and Consultants, told Fin24 that the markets seem to have factored in the possibility of a Zuma victory as the currency did not suffer a pronounced depreciation.

The local currency had been volatile leading up to the vote, but only dropped from R13.20 to as low as R13.41 to the US dollar on announcement of the outcome.

"Even though a successful vote of no confidence would bode well for the local unit, the implications for political stability towards year end would have been significant," Grater said.

Grater also pointed out that although there were elements of hope that came from the no confidence motion, the country still has to face a credit rating review from Moody's on Friday.

However, Grater does not expect the rating review to change much.

"The institution flagged the weakening of South Africa's institutional framework; reduced growth prospects (which were reflective of the policy uncertainty and slower progress with structural reforms) and the continued erosion of fiscal strength (due to rising public debt and contingent liabilities) as the rationale for the downgrade in June. Friday’s rating review is expected to result in an unchanged foreign and local currency sovereign credit rating."