Economists take Mbeki’s exit in stride

Business Report September 22, 2008

By Tom Robbins

Cape Town - Economists have downplayed the impact on markets of the dramatic news that President Thabo Mbeki would exit the presidency early, saying local investors were far more worried about the US banking crisis.

While there was uncertainty over the composition of a caretaker government, there was no new cause for concern about policy continuity.

Others even argued that it was becoming more likely that under a new presidency there would be no dramatic policy departure.

Arthur Kamp, an economist at Sanlam Investment Management, said that while the rapid change in political leadership announced over the weekend was "not unimportant", there had been no change in policy for the markets to digest.

While the markets would be alert to any change, ANC policy was already well established and publicised, said Kamp.

"I am not sure that a change in personnel will result in a change in policy. We already know who the key role players are and they aren't changing."

He said markets would be more concerned about whether efforts by US authorities to remove toxic assets from bank balance sheets in the US would restore financial confidence.

Dawie Roodt, the chief economist at the Efficient Group, said the recent political developments created a mixed picture for markets.

Roodt expected a short-lived fall in markets as a result.

Markets liked certainty and the fact that there was no official clarity on who would be the interim president created uncertainty said, Roodt.

It would have been better to have a smoother transition, with Mbeki staying in power until next year's election, he said, adding that it was worrying that elements in the ANC camp, such as the Youth League, exerted so much influence.

But the good news was that no rules or laws had been broken in the transition. "The ANC are playing by the rules of the game. There hasn't been a coup," he said.

Particularly positive was the ANC's emphasis on the independence of the criminal justice system after Judge Chris Nicholson's inference there had been political interference in charging ANC president Jacob Zuma with corruption.

Roodt added that while there was uncertainty on the policy direction of a Zuma presidency, this had existed before.

Steven Friedman, the director of the Centre for the Study of Democracy, said he did not believe a new caretaker government would introduce any ground-breaking changes before next year's election.

Had Mbeki not agreed to resign, this would have had a more dramatic impact.

Friedman pointed out that finance minister Trevor Manuel was staying in the end, and he expected more cabinet ministers to remain.

Raymond Parsons, the overall business convener at Nedlac, the government, labour and business negotiating chamber, expected markets and business to take the developments "in their stride", as a change in political leadership next year had already been factored in.

Parsons added that the ANC leadership had stressed its intention to handle the transition in a smooth fashion that was sensitive to investor confidence and market stability