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Rabobank analysts point out that South Africa is heading to the polls and the governing African National Congress is set to win today’s general election.

Key Quotes

“The scale of the ANC’s victory will prove crucial for the local assets.”

“If the governing party receives close to 60% of votes, it would provide market-friendly President Ramaphosa with a strong mandate to implement structural reforms to reinvigorate the sluggish pace of growth and to strengthen his commitment to consolidate South Africa’s public finances. However, if the victory is closer to 50%, that would be seen as a disappointing result for the ANC and local assets. It could reignite market concerns that insufficient policy progress will be made to prevent rating agencies from downgrading the country’s credit rating.”

“Still, and even if the ANC maintains a comfortable majority after the elections, Ramaphosa will have to overcome resistance from influential members of his party to unpopular reforms that would challenge the status quo based on cronyism and corruption. This implies that a rally in local assets and the rand -in response to a market friendly outcome of elections- will only be sustainable if investors subsequently witness a strong push for urgently required reforms.”