Calm prevailing on markets following Mbeki's resignation

“The markets look pretty good at the moment, with the All Share up about 2%, the Rand is stable at R8 to the Dollar and bond markets are also stable,” economist at Econometrix Treasury Management (ETM), Russell Lamberti told BuaNews, Monday.

Lamberti explained there are two forces pulling in opposite directions on the markets at the moment.

“The first is that of potential political instability should a leadership vacuum develop in South Africa.

“This is being counter-balanced by two things which include global investors being far more upbeat since the announcement of the US government's bail-out plan for banks, and also because leadership change in South Africa has been a long time coming.

“Leadership change was expected in South Africa within the next seven or eight months anyway, so although the speed of change came as a surprise, investors expected the change,” he said.

Stability test

The peaceful manner in which President Mbeki was recalled by the African National Congress (ANC), said Lamberti, also allayed investors fears as the decision was done in a respectful manner within the institutional structures of the ANC.

He believes Mbeki's resignation will be good test of just how stable South Africa's institutions are, and whether or not government, in its entirety, is able to function without a designated leader.

“The next 12 months will be very interesting ...foreign investors know what's going on in South Africa and have a good understanding of the political situation,” concluded Lamberti.

Nedbank economist Nicky Weimar told BuaNews calm seems to be prevailing on the markets at the moment.

“Everything is fairly calm at the moment, but the news comes in the wake of a fairly stormy week on global markets last week.

“There has been no real reaction and very little response on the markets at the moment ... I suppose it's because the markets expected the change,” Weimar said.

Global economy worst since Great Depression

Global markets have undergone a period of carnage in the last year, she said, and South Africa has not been spared from this either. The world economy is in the worst shape it has been in since the Wall Street crash of 1929, known as the Great Depression.

“The world itself is facing an uncertain future ... so it's going to be a ‘wait-and-see' attitude amongst investors for the moment,” said Weimar.

In his televised address on Sunday evening, President Mbeki highlighted many of his successes whilst at the helm of government, singling out, however, perhaps his greatest achievement of creating sustained economic growth in South Africa.

“... we transformed our economy, resulting in the longest sustained period of economic growth in the history of our country; we introduced an indigent policy that reaches large numbers of those in need; we made the necessary advances so as to bring about a developmental state, the better to respond to the many and varied challenges of the transformation of our country,” said Mbeki.

Still more to be done

The out-going president highlighted, however, that despite transforming the South African economy that much still needed to be done.

“Despite the economic advances we have made, I would be the first to say that even as we ensured consistent economic growth, the fruits of these positive results are still to be fully and equitably shared among our people.

“... hence the abject poverty we still find coexisting side by side with extraordinary opulence,” Mbeki said.

Article published courtesy of BuaNews