South African banking stocks rallied on Tuesday, buoyed by optimism that the newly elected leader of the ruling African National Congress will push through policies aimed at putting the economy on a stronger footing.
South Africa’s Deputy President Cyril Ramaphosa – a darling of markets – narrowly beat former cabinet minister Nkosazana Dlamini-Zuma in Monday’s vote, marking a pivotal moment for the party that launched black-majority rule under Nelson Mandela’s leadership 23 years ago.
As ANC leader, Ramaphosa, a 65-year-old union leader turned businessman, is likely to become the next president after elections in 2019 because of his party’s electoral dominance.
Ratings agency Moody’s said Ramaphosa’s victory opened up tentative prospects of a policy shift and rise in business confidence that “could reverse the gradual deterioration in South Africa’s credit fundamentals.”
Ramaphosa, a former chairman of Africa’s biggest telecoms operator MTN Group, is seen by business leaders as well placed to turn around an economy. South Africa’s GDP is estimated to grow by less than a percent this year, while the unemployment rate is at near records just shy of 28 percent.
In an open letter, Mike Brown, the chief executive of South Africa’s No.4 bank, Nedbank, urged Ramaphosa to immediately address governance failures in state-owned companies and ensure that the country retains the last sovereign investment grade from Moody‘s.