Investors likely to cheer South Africa’s Malema suspension

November 10, 2011

International investors have been feeling uneasy for the last couple of years about the views of South Africa’s African National Congress youth wing leader Julius Malema, so his suspension for five years today may help South African assets.

Malema has repeatedly called for nationalisation of the mines, with some of his most recent comments just a few weeks ago, according to local press reports:

Mines should be nationalised…nationalisation is a concluded and closed matter.

Ratings agency Moody’s cut South Africa’s outlook this week to negative this week, saying pressure from unions and black voters wanting greater economic redress for the ills of apartheid could hurt the country’s finances.

Malema’s suspension is seen as good news for President Jacob Zuma’s re-election chances next year.

Barclays Capital analysts say the suspension

is likely to be viewed as an important strengthening of President Zuma…this is likely to be the end of the political road for Malema

South African domestic bonds rocketed higher earlier this year when investors still fancied high-yielding debt in local currencies, but worries about the global economy have killed that growth-oriented trade.

However, Charles Robertson of Renaissance Capital, writing under the title “Renaissance Man”, says South Africa was borrowing in international markets at near-record rates earlier this year, and ┬áthis helped the rand towards its highest level since the boom of 2007 .

While emerging market borrowing in international sovereign and corporate bond markets will probably have fallen sharply in the last quarter, it should pick up again, and the rand can strengthen in the next few months to 7.5 per dollar from 8 now, Renaissance says.


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