Zuma ordered to resign as South Africa's president

The ANC has ordered South African President Jacob Zuma to resign. What does this mean for the rand?

ZAR
Source: Bloomberg

Zuma recall now official

The African National Congress (ANC) has now confirmed through the National Executive Committee (NEC) that South African president, Jacob Zuma, is being recalled from his position. The current president has been given 48 hours’ notice to step down and should he do so, Cyril Ramaphosa, the current deputy president (and ANC president), would act as president until a new one is elected via secret ballot in the National Assembly.

Should Zuma decide not to step down, it will then be up to the National Assembly to remove him. Alternatively, his removal could be done through impeachment proceedings.

What if he doesn’t resign?

Opposition parties have already tabled a motion of no confidence in an attempt to remove Zuma through the National Assembly. The date scheduled for the motion is 22 February 2018, although the Economic Freedom Fighters (EFF) have asked the speaker of parliament to move this date forward, increasing the pressure on the ANC to enforce the removal of the president.

The ANC may be hard pressed at the ballot box at the next elections, should the end of Zuma's tenure arrive through opposition party efforts. Especially now that the ruling ANC have conceded that they no longer want him to serve as president of the country. It has been suggested that the ANC may also invoke a motion of no confidence to forcibly remove the president, should he not do so willingly.

A motion of no confidence, should it be successful in ousting the current president, would require the entire cabinet to resign. The speaker of parliament, Baleka Mbete, would then be acting president until parliament decides on a new one.

The reaction of the rand following the official announcement of Zuma’s recall has been relatively muted. It would appear that the writing was on the wall following the impromptu NEC meeting on Monday 12 February.

The USD/ZAR chart above shows the currency to still be trading in a short-term range between R11.80/$ and R12.22/$. The longer-term trend does however remain down; in other words, dollar weakness to rand strength. A break of the R11.80/$ level would suggest the downward trend will be continued, with the next level of historical support considered at R11.30/$. For a change in the directional trend, a break of R12.22/$ is needed, and that currently is not the favoured scenario.

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