Long road ahead for South African investors

Investors in South African assets need a lot more convincing that the government crackdown on corruption will prove effective.

The rand strengthened as much as 1% against the dollar Thursday, the best gain among 15 major currencies tracked by Bloomberg.

Government bond prices climbed and the benchmark stock index hit a one-week high after the ruling African National Congress suspended one of its most senior officials.

But market participants were muted in their enthusiasm over the move.

Sidelining ANC Secretary-General Ace Magashule after he defied an ultimatum to vacate his post while he stands trial on graft charges is seen as a boost to the authority of President Cyril Ramaphosa.

Magashule has repeatedly challenged the South African leader, who is attempting to implement policies to revive growth in the pandemic-ravaged economy.

“This progress in the fight against corruption will be well received by investors,” said Michele Santangelo, a portfolio manager at Independent Securities in Johannesburg.

“However, there is some way to go and there will certainly be pushback from those corrupt parties looking to protect themselves.”

“It’s rand-positive, as it should allow Ramaphosa potentially more leeway to implement economic reforms and tackle corruption, and could bolster his odds of securing a second term as ANC leader next year,” said Natalie Rivett, emerging-markets analyst.

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Long road ahead for South African investors