MyCURRENCY News | Week 23 2024

What we know

Arrogance. Hubris. Corruption. Incompetence.

It took 30 years and we’ve finally seen how these (what have come to be defining) characteristics finally caught up with a party that was once the political darling of the World. The 17.73% drop in support was a stunning result, significantly worse than even the most bearish predictions and polls prior to the election. For decades it felt as though blind loyalty, combined with (justified) gratitude for the ANC’s role in helping transform South African society, would perhaps enable the party to just cruise from one election to the next, fending off the odd blip and dip in its support base.

There seems to be a sense that the next few days and weeks present something of a historic moment for this country, allowing for a reset that will finally start to refloat what has long felt like a sinking ship. At the same time, when an incredible opportunity presents itself, it very often gives rise to alternatives that may be equally unattractive and damaging. As such, we can only hope, like the rest of the country and the watching world, that the optimal path is chosen, whatever that may be.

To recap how analysts were viewing these elections a week ago:

1) ANC to retain its majority, an unlikely outcome and clearly a negative one given the party’s track-record (or lack thereof). This would have meant 5 years of more of the same.

2) ANC to lose its majority, falling perhaps in the 45% – 49.99% – a likely and encouraging outcome, showing that voters were finally making their feelings felt. This would have necessitated a coalition with smaller, less populist parties, leaving the party largely free to continue as before.

3) ANC to lose its majority, falling to a 40% – 44.99% count – a very possible outcome, with the party finally getting its dues after 30 years of poor performance. This was always going to be the scenario with both the most upside and downside, depending on which major coalition party would be introduced.

With the MK Party seemingly uninterested in working with the ANC and the EFF’s relatively poor showing meaning its support alone would not be enough to from a majority, the early whispers have been that we may just see co-operation between the ANC and the DA. What form this will take, what trade-offs will be required and, indeed, whether this could in anyway be sustainable, remain to be seen; however, it’s hard not feel somewhat buoyed by the thought of this happening.

Away from local politics the two major economic releases this week will be the ECB rate decision where the first interest rate cut in 8 years is expected on Thursday, followed by the monthly Non-Farm Payroll release out of the USA on Friday. Given the slight wobble in the USD in response to recent inflation and jobs data, a miss to the downside here could prove to be the catalyst for a more sustained sell-off, which would of course benefit the ZAR.