Losing confidence

Tamlyn Stewart and I-Net Bridge

Tamlyn Stewart and I-Net Bridge

The supreme court of appeal's ruling against ANC presidential candidate Jacob Zuma could rattle investor confidence in South Africa, analysts said yesterday.

Razia Khan, Standard Chartered Africa economist, said investors might fear renewed focus on politicking after the judgment diverted attention from the reassurance they seek that economic policy will not change in a meaningful way under the new leadership.

The supreme court of appeal overturned an earlier high court decision that dismissed the corruption charges against Zuma.

Khan said: "This should mean that ANC President Zuma can be charged again by the National Prosecuting Authority."

The ruling also found that the judge in the earlier High Court decision may have overstepped his authority in saying that the decision to prosecute Zuma had been politically motivated.

Khan said: "Though the ruling demonstrates the strength of South Africa's institutions, the decision introduces more uncertainty into the political outlook.

"Protest against the decision from grassroots supporters of Jacob Zuma is probable. The knee-jerk reaction of markets has therefore been negative."

The rand weakened yesterday following the court's ruling, but Chris Hart, chief economist at Investment Solutions, said the rand's weakness was not solely due to the Zuma judgment.

"The rand already started to weaken last week. The judgment might well be affecting sentiment. But the currency weakness started last week. The rand broke technical levels on Friday and extended weaker today.

"We often see (rand) strength into December and weakness in January. I suspect as we come back in January we start with imports and that kind of thing. That pressure eases in December," he said.

Iraj Abedian, an economist at Pan African Resources, agreed that yesterday's decision could impact on investment.

"The decision made will shift the attention of the leaders from economic issues and elections to personal legal issues of the leadership and awake concerns by the investor community on the political instability and other factors affecting credit risking.

"Investors are watching every move to see the implications, trying to see what it will all mean. Through the foreign exchange market you can note the pressure on the rand after the statement was released," said Abedian.

"People are going to ask how much more pressure the country can take," he said. - With Maryanne Maina