Zuma repositions himself in ANC presidential race

President concerned over potential collapse of conference Markets strengthen on belief Ramaphosa will win

The tight battle for the leadership of the ANC has taken yet another unexpected turn, with President Jacob Zuma now positioning himself as a unifying force out of concern that the December conference might collapse.

The change from being an explicit backer of his former wife Nkosazana DlaminiZuma’s bid comes against a backdrop of unexpected strength in financial markets on the questionable assumption that the race has been all but won by Deputy President Cyril Ramaphosa.

Despite the S&P Global Ratings decision last week to downgrade the local currency rating to subinvestment, or junk, status, with a stable outlook, the rand firmed to R13.6948 against the dollar in late afternoon trade on Tuesday, extending gains for the week so far to 3.2%.

Moody’s has retained its local currency credit rating for now.

At a meeting on Monday convened at Luthuli House, attended by all seven presidential hopefuls, provincial ANC secretaries and chairmen, Zuma said that he was concerned over the collapse of the conference. According to two ANC leaders who attended the meeting, Zuma emphasised the need for unity and urged provincial leaders to rein in their delegates.

All seven ANC presidential hopefuls are said to have given Zuma an undertaking that whoever wins in the ANC’s elective race will be supported by the rest, ANC deputy secretarygeneral Jessie Duarte said on Tuesday evening.

“We heard that commitment coming from each and every [person] themselves in yesterday’s meeting,” Duarte told delegates to the Free State provincial general council meeting in Parys on Tuesday.

The December elective conference is set to be a showdown between Zuma’s preferred candidate, Dlamini-Zuma, and Ramaphosa.

Contrary to market expectations that Ramaphosa has wrapped up the race, it is set to come down to the wire.

Insiders in the Ramaphosa camp have raised concern over the potential for Dlamini-Zuma backers to collapse the conference if it becomes clear that she has lost. They claim this is what took place at the Eastern Cape conference, which descended into chaos in September.

At the meeting, Zuma reiterated his view that the losing candidate for the presidential position should be a shoo-in for the deputy president position. The president urged provincial leaders to consider the possibility of two deputy presidents, to ensure that “no one is excluded”.

Provincial chairmen are set to hold a follow-up meeting over the weekend to potentially identify a “unifying candidate” for the position of deputy.

Meanwhile, the rand’s strength has surprised analysts, who expected the currency to weaken after S&P’s decision to downgrade the local currency rating to subinvestment.

The rand’s initial gains from R14.15/$ after S&P’s announcement to less than R14 were based on a relief rally after the worst-case scenario of a double downgrade was averted.

But since then a number of developments have supported the local currency. These include indications the government is adopting a more prudent

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fiscal approach. The government has announced it is looking to implement R30bn in tax hikes and more than R50bn in spending cuts. At the same time, optimism that Ramaphosa could be elected ANC president in December has increased.

Rand Merchant Bank analyst John Cairns said that this might be the real reason for the stronger rand, coinciding with a sharp shift in market views. “A few months ago, the general thinking among fund managers was that Dr Nkosazana DlaminiZuma was probably going to win, but now the thinking is on whether the deputy president has it sewn up,” he said.

Ramaphosa is seen as the market-friendly candidate, while the rand could weaken if Dlamini-Zuma wins.

If Ramaphosa wins, the rand could go to R13.50 and even reach R13, Cairns said.

“But while Ramaphosa's odds have risen, he is certainly not a certain victor,” he said.

TreasuryOne analyst Phillip Pearce agreed, and said the market was getting ahead of itself.

“Rumours that the market is pricing in a Ramaphosa win in December are hard to believe when you consider just how murky the election process is.”

Bravura analyst Ian Matthews said the market was reacting to reports that Ramaphosa was leading the presidential race.