Macro Analysis /
South Africa

South Africa: Political turbulence rocks rand as markets fear Ramaphosa’s recall

  • NEC to meet on Thursday night to discuss Ramaphosa's potential impeachment

  • Ramaphosa would not be asked to step aside as long as he is not charged to appear in a court of law

  • We think it is likely that the NEC would close ranks behind Ramaphosa

South Africa: Political turbulence rocks rand as markets fear Ramaphosa’s recall
1 December 2022

The local currency is under pressure on Thursday (Dec 1) after having firmed substantially since the start of November. The local currency is presently trading at USD/ZAR 17.53, or 2.0% higher than the close at USD/ZAR 17.17 on Wednesday. Investors are concerned about a the potential for president Cyril Ramaphosa to get removed from office ahead of an internal election on Dec 16-20 which was expected to cement him in place for another five years at the head of the ANC.

The ANC has called an urgent meeting of its National Executive Committee (NEC) on Thursday night to discuss the implications of the report of an independent panel which found preliminary evidence that the ANC and country president may have violated the law on crime prevention and exposed himself to a conflict of interest by not reporting a large theft of foreign currency from his cattle farm in Limpopo as well as by deriving income from the farm while being a member of cabinet.

The ANC will deliver its official position in a statement after the special NEC meeting called for tonight. However, senior NEC member and part of the cabinet Nkosazana Dlamini-Zuma expressed her personal view in an interview for the eNCA that the president should immediately step aside from both ANC and country president. She and other members of the NEC have already called on the president to step aside at previous NEC meetings.

However, it is very unlikely that the NEC decides to ask the president to step aside or that he will do so voluntarily. According to the step-aside rules of the ANC, one has to be charged and indicted to appear in a court of law for the NEC to ask them to step aside, ANC spokesperson Pule Mabe told the eNCA on Thursday. We did this to ANC secretary general Ace Magashule and other senior NEC members, Pule added. However, there are no charges raised against the president at this stage although the matter is being investigated by the police. The ANC December conference is going ahead and could not be stopped over a "headline", Mabe also retorted.

President Ramaphosa has denied all allegations in a statement and has said prior to the release of the parliamentary panel report that he was not concerned that he was going to be recalled. The Phala Phala scandal is the largest challenge to Ramaphosa's presidency so far with potential to create a major political and constitutional crisis. Such a crisis would be damaging not only for the president but for the ANC as an organization which already suffers erosion in political support according to various surveys, as well as for the country.

We think that the opposition would try to use the situation to destabilize ANC's government and seek the removal of the president. If Ramaphosa's detractors within the ANC and the opposition succeed with their calls to remove the president, which we do not think will happen, his role would have to be taken by deputy president David Mabuza. This would be a very unfavourable outcome. We expect that the ANC will close ranks behind Ramaphosa and shield him from the parliamentary process because the alternative would be to allow the opposition to unseat their president before the ANC Conference where he is expected to win reelection with no other sufficiently popular candidate.