South Africa’s rand weakened early on Wednesday, retreating further from a nine-month high hit earlier in the week, as investors worry that the newly elected leader of the ruling party may not be able to push through policy changes.
Cyril Ramaphosa, who is South Africa’s deputy president, was elected the new leader of the African National Congress (ANC) on Monday, succeeding President Jacob Zuma – whose presidency has been tainted with corruption allegations – as party head.
Expectations that Ramaphosa would win the ANC race had pushed the rand to 12.5200 per dollar on Monday, its firmest since March 27, before a cabinet reshuffle by Zuma rocked markets and triggered credit ratings downgrades to “junk”.
As of 0620 GMT on Wednesday, the rand was at 12.7800 per dollar, 0.79 percent weaker than its New York close on Tuesday.
Some investors were worried that Ramaphosa may not be able to push through policy changes because the ANC’s top decision making group, known as the “Top Six”, was split down the middle, consisting of three politicians apiece drawn from Ramaphosa’s camp and that of his rival Nkosazana Dlamini-Zuma.
Dlamini-Zuma is a former cabinet minister and Zuma’s ex-wife.
“It is not at all clear whether Ramaphosa will have the support to clean up corruption in the ANC or to remove President Zuma from office, which is what many market-participants were hoping for,” analysts at NKC African Economics wrote in a note.
While Ramaphosa has promised to fight rampant corruption and revitalise the economy, Dlamini-Zuma’s camp champion radical economic transformation for the benefit of the black majority.
In fixed income, the yield on the benchmark government bond due in 2026 rose 3 basis points to 8.695 percent, reflecting weaker bond prices.