The scandal-hit era of Jacob Zuma officially ended moments ago, when the South African parliament voted to make Cyril Ramaphosa the country's new president. Ramaphosa, the ANC's leader, now faces a daunting task of reviving Africa's most industrialised economy following nine years of Zuma governance that was characterized by stagnant growth, graft allegations and sliding support for the ruling party.
As noted yesterday, Ramaphosa, who replaced Zuma as leader of the ANC in December, became acting president after Zuma stepped down in a late-night television address on Wednesday night. Today's parliamentary vote made his ascension to the leadership official, and he is expected to be sworn in later in the day.
Zuma's transition was surprisingly uneventful, with some expecting a worst case scenario in which Zuma would pull a Mugabe and refuse to step down. In the end, Zuma’s nine years of rule came to a sudden end on Wednesday night as he resigned with immediate effect during a televised address — abruptly reversing course after he had resisted weeks of intense pressure from the ANC to stand aside for Ramaphosa.
The speaker of parliament received Mr Zuma’s letter of resignation on Thursday.
In the face of his defiance, the party had been preparing to vote to remove Mr Zuma through parliament, which would have forced his resignation. As the FT notes, to the last, Zuma said that he disagreed with the ANC’s decision to sack him and that the party had not explained why he must go.
“I do not fear exiting political office, however I have asked the party to articulate my transgressions,” Mr Zuma said.
Meanwhile, from a market standpoint, optimism is positively brimming over, which is understandable: Zuma’s presidency had become plagued by constant policy missteps and accusations of corruption, weighing on investor/business confidence.
As a result, market participants have high hopes that Ramaphosa will enact policy reforms to kickstart the momentum in the South Africa economy, as well as clamping down on corruption. The result has been a dramatic surge in the ZAR which is back at levels last seen in 2015.
And now, all eyes turn to Ramaphosa who faces his first major test in less than a week. The Budget Speech is going to be presented next Wednesday, February 21 at 14:00 local time / 12:00 GMT. The Budget will outline the country’s economic growth strategy and thus represents a litmus test to see if market expectations are well placed. How the government intends to cover the shortfall (eg. an increase in VAT) and how far the fiscal position has deteriorated are in focus.
As Citi notes, "a rating downgrade is at risk here." Sometime after the Budget, Moody's is due to conclude its credit rating review, likely March. Back on November 24, Moody's issued a warning but did not downgrade the Baa3 rating as some had expected. Citi’s South Africa economist Gina Schoeman said last week that there was a 55% chance that Moody's won't downgrade - but that leaves plenty of room that they will.
A reshuffle may also be on the cards. The Moody’s analyst said earlier today that the credit agency is focusing on the policy impact of the leadership change. While Zuma’s cabinet doesn’t have to resign, Ramaphosa will be able to shuffle the cards if he so wishes. Investors will be watching to see if he retains Malusi Gigaba as finance minister ahead of the Budget.