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Markets shrug off Zuma case

August 4, 2008


Adenaan Hadien, Cadiz Holdings

adenaan_resized.JPGPietermaritzburg may well have been brought to a standstill with the resumed corruption case of Jacob Zuma in the High Court, but I suspect the same would not be true for local markets.  Certainly, if last week’s market performances are anything to go by, then reactions are likely to be muted.  Last Thursday, the Constitutional Court dismissed all four of Zuma’s appeals to prevent the state from using potentially damaging evidence against him in his corruption trial.  On Monday, Zuma’s legal team submitted an application for a permanent stay of prosecution, arguing that his constitutional rights have been violated.  This application and the round of appeals which may follow if, as is expected, it was rejected, would again delay things.
On the week, the local currency gained over 4% against South Africa’s trading partners’ currencies and bonds enjoyed gains last seen in the late-1990s.  Equities put in a more mixed performance on the week, due to the oscillating woes of resources against financials and industrials.  The performances of bonds were even more impressive, given the higher-than-expected consumer inflation figures released on Wednesday.  Granted, Thursday’s producer inflation numbers were more encouraging.

It is not that the Zuma trial is not important.  That the leader of the majority political party is on trial for corruption is certainly a big deal.  But the saga has dragged on for so long that there is a sense of numbness creeping in.  There is also a positive spin to all this.  Notwithstanding vitriolic noises sometimes made by allies, and while there have certainly been casualties in a brutal battle for succession in the ruling party that has extended to key political institutions, South Africa’s democracy remains firmly intact.  If anything is giving market participants sleepless nights, then it has to be what Reserve Bank Governor Tito Mboweni and his Monetary Policy Committee will decide when they meet next week.  Last week’s performances suggest that there isn’t too much sleep being lost at the moment.

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