As investors we are taught not to let macro factors overly influence our investment decisions. There is empirical evidence suggesting that even if you can correctly call a macro event like Brexit it is still impossible to know how the event may influence markets and therefore how to exploit the opportunity and / or avoid the threat.
Both Brexit and the Trump’s Presidency attested to this in that after markets initially fell they quickly recovered and continued growing notwithstanding what you may have thought would be value destroying events. Had you bet on this you would have lost money. Bringing me to the theme for today’s article, which is the political risk SA is facing. Please read with the aforementioned macro forecasting risk in mind.
The political jostling is reaching a crescendo and is likely to accelerate as we approach the end of the year. The big question now is whether the ANC will hold a conference at year-end as required by their constitution. Political commentators attached a 50% probability of the conference proceeding, which means there is a 50% of no conference being held. If Zuma thinks he is going to lose the election or should I say the election of his preferred candidate, which is still Zuma winning, he will try his utmost to disrupt and / or delay the conference using the courts. If he succeeds Zuma remains in power.
If the conference proceeds then we are looking at three serious contenders. Firstly, the ex-wife (NZD), cut from the same cloth and sprouting the same “white monopoly capital and radical economic transformation” rhetoric. Quite simply a disaster for SA Inc.
The 2nd serious contender is current deputy president, Cyril Ramaphosa (CR), if ANC history is anything to go by then the deputy president is supposed to be a shoo-in. However not this time. Cyril represents the great hope for SA Inc, likely to implement the National Development Plan and deal firmly with the maladministration and corruption rot, which is now endemic to SA Inc. A huge task ahead.
The 3rd candidate to enter the race is that of Zweli Mkhize (ZM), seen to be a unifying candidate between the two ANC factions. Sympathetic to Zuma, it has even been muted that ZM is really Zuma’s preferred candidate and that is ex-wife was simply a decoy. Mkhize is a serious contender in his own right given his economic background and moderate approach. Unfortunately, his key supporters are the crooked premier league, so one wonders what promises have been made, which would surely compromise his presidency.
SA Inc faces three roads, the low road (NZD); the high, but bumpy road (CR) and uncharted middle road (ZM). Given the impossible and fruitless benefit and trying to predict the outcome, I simply recommend we buckle-up in expectation of plenty of “potholes”.
Mcomm, CFPÂ®, HdipTax
T. 021-851 3746