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Summary of "South Africa: Surprising scenarios to ANC conference"

Core Content

This document explores three contrarian scenarios that could emerge from the ANC's 54th National Conference in December 2017, challenging the conventional wisdom that the conference would not lead to significant political or economic changes. The analysis is provided by Nic Borain, a senior political analyst at BNP Paribas South Africa, and is intended for investment research purposes under MiFID regulations.

Main Scenarios

Scenario 1: Cyril Ramaphosa Victorious, Jacob Zuma Recalled

• Assumption: Mr. Ramaphosa may emerge as a strong leader despite his perceived lack of charisma and past associations.
• Potential Outcomes:
  • Recall of Zuma: A swift recall of Jacob Zuma as President.
  • Reforms in SOEs: A radical transformation of state-owned enterprises (SOEs) leadership and boards.
  • Fiscal Consolidation: A change in leadership at the National Treasury to resume fiscal consolidation.
  • Anti-corruption Measures: Purge of institutions such as the Revenue Service, Hawks, and NPA.
  • State Security Agency Clean-out: Investigation and prosecution of state capture-related crimes.
• Market Reaction: Initial market optimism may be tempered by Ramaphosa's likely compromise-driven approach, which could weaken his reform agenda.

Scenario 2: A Decisive Split in the ANC

• Assumption: A split could occur if the Zuma-aligned faction is defeated, leading to early elections.
• Outcomes:
  • Formation of New Alliance: A temporary party or alliance (e.g., United Democratic Front) formed by ANC dissenters, including Ramaphosa's groups and former allies like Cosatu and SACP.
  • Government of National Unity: Potential coalition with the Economic Freedom Fighters (EFF) and the Democratic Alliance (DA).
  • Three Possible Outcomes:
    1. Dissenters win and implement radical reforms.
    2. Dissenters fail to force early elections, leading to an unstable ANC-led government.
    3. Ramaphosa is elected President via a motion of no-confidence, but the pro-Dlamini-Zuma faction may expel him and other reformists from the party, limiting his ability to lead effectively.

Scenario 3: Nkosazana Dlamini-Zuma Breaks with Expectations

• Assumption: Ms. Dlamini-Zuma may recall Jacob Zuma despite her strong ties to the state capture agenda.
• Potential Outcomes:
  • Recall of Zuma: If she decides to recall Zuma, it could signal a shift in leadership and a break from the current state capture narrative.
  • Leadership Change: This could lead to a more focused and accountable leadership style, potentially improving ANC's popularity and economic performance.
  • Uncertainty: There is no guarantee that this would lead to positive outcomes, as the ANC's popularity is expected to decline in upcoming elections.

Key Information

• The ANC is facing significant internal and external challenges, including state capture, corruption, and electoral losses.
• The three scenarios presented are based on the idea that the ANC may experience a break from the status quo.
• The SACP and Cosatu support for Ramaphosa may act as a constraint on reform efforts.
• The branch nomination process may limit the ability of Ramaphosa to compromise, making him a weak president if he wins.
• The legal and regulatory disclosures emphasize that the document is not an investment recommendation and is intended for professional clients only.
• The analysis is subject to change and should not be relied upon as authoritative.

Conclusion

These contrarian scenarios highlight the potential for unexpected political shifts in South Africa, particularly if the ANC conference results in a change of leadership or internal divisions. While the document acknowledges the high risk of electoral loss for the ANC, it also explores the possibility of reform under different leadership configurations, emphasizing the uncertainty and complexity of the political landscape.