- Siphiwe Sibeko/Reuters
South Africa’s parliament will debate a motion to impeach President Jacob Zuma this week, according to The Guardian.
Last Thursday, the highest court in South Africa’s ruled that Zuma failed to uphold the constitution after he failed to repay about $16 million in government money he used to upgrade his private home.
Since the ruling, “opposition party leaders, ordinary South Africans and even an anti-apartheid activist jailed alongside Nelson Mandela have called on Zuma to step down,” The Guardian notes.
Moreover, South Africa’s ruling African National Congress (ANC) party “held crisis talks on Monday to discuss the fallout from” last weeks court ruling, according to Reuters. Although the ANC backed Zuma after the ruling, the scandal could strain relations between the ANC and some of its allies.
Notably, after the ruling, the South African rand was stronger by 1.5% against the dollar, running the rand’s advance the dollar to 6.4% in March, its best performance in months.
Some analysts believe that the rand could continue to strengthen – at least in the short term – given the ongoing issues.
“…the deepening corruption scandal surrounding President Jacob Zuma could, perhaps counter-intuitively, cause the rand to rally further if the markets expect that the controversial president will be forced to resign,” Capital Economics’ Africa economist John Ashbourne wrote last week in a note to clients.
“This would be similar to the situation in Brazil, where the real rallied following speculation that President Dilma Rousseff will be forced out of office, potentially bringing the country’s long political crisis to a close,” he observed.
But despite the short-term optimism, the longer-term outlooks for the country and the currency are unclear.
“However, questions surrounding what this means for Zuma and the ANC, and separate issues related to the Finance Ministry and the relationship between Finance Minister Gordhan and Zuma, remain highly uncertain,” Morgan Stanley team led by Hans W. Redeker in a recent note to clients.
“Our longer-term bearishness on ZAR remains unchanged, given these political risks, weakness in growth and the slow pace with which South Africa’s external accounts are rebalancing.”
Plus, even if Zuma is impeached, that doesn’t mean that everything in South Africa’s economy will be automatically fixed.
“We stress, however, that any market optimism surrounding a political change would not last long; Mr. Zuma’s replacement would still face a dire economic situation,” Ashbourne added.