Cape Town – Pre-election expectations will not be met, and markets will be disappointed in Cyril Ramaphosa’s embryonic first 100 days, predicts George Herman, director and Chief Investment Officer of Citadel Investment Services.
This negative perception has much to do with the composition of the ANC Top 6, as both ANC deputy president David Mabuza and secretary general Ace Magashule have been previously implicated in corruption scandals. This brings a lack of credibility and confidence to the Top 6, which is already seen as divided.
“We unfortunately pinned all of our hopes on Mr Ramaphosa. The financial markets were hoping that he could solve a whole host of issues all at the same time. Everything from a budget conundrum, to the SOEs, to the lack of growth, to education, to unemployment – was his problem to fix.
“There is no single person who can solve that.”
Herman said it can perhaps happen if he gets a strong mandate with absolute backing from everybody who supports him, because tough decisions are required to achieve any one of these things.
“Unfortunately the mandate and the management team that Mr Ramaphosa has been handed is not nearly that – and it will be very difficult for him to make the difficult decisions and implement them.”
On the muted reaction to the ANC’s announcement of land expropriation without compensation, Herman said the markets are “very sanguine about it, because when the ANC makes statements and get on the stage directly after conferences, it’s often very populist by nature”.
In reality it takes a long time to get these things implemented. One has to go through the fine print of it, and that is why the markets are very casual about it right now, he said.
He, however, cautioned that land expropriation was a crucial issue from a financial perspective, and therefore the markets would react “very, very negatively, should it become a reality”.
On Thursday, AgriSA warned that should Section 25 of the Constitution be amended to allow for land expropriation without compensation, financial markets would divest and investor confidence in SA be shattered.
Herman welcomed the decision to nationalise the South African Reserve Bank as “a fantastic idea”.
The Reserve Bank should never have been in private ownership in the first place. It doesn’t make any economic sense, he said.
“There is no economic benefit to it. The central bank is not driven for economic gain, it is not run along normal commercial lines, so it actually does not make any sense. They should nationalise it immediately,” said Herman.
He, however, pointed out that it was important not to fiddle with the mandate and the independence of the Reserve Bank.
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