Yesterday, the rand soared on the unexpected announcement by the national assembly speaker (and purported Zuma replacement) Baleka Mbete that a no-confidence vote for president Jacob Zuma would take place in secret. The vote is set to take place shortly. For those willing to take a sizable gamble, here is what to expect.
Superficially, a secret vote increases the odds of Zuma’s ouster – a market friendly event and one which would send the rand surging even more – because members of the ruling party can vote him out without risking party alliances; motion requires the backing of a majority of the 400 lawmakers to pass. However, some have speculated that while Mbete, Zuma’s likely successor, has every incentive to allow a secret ballot to happen, it is rarely a good idea to be the one seen to be doing the ousting. And, as Citi notes, “she stands more to gain from being loyal to Zuma if she wants to keep her party onside.” Thus, the cynical view would perhaps be that the ANC has been whipping votes and believe they have the necessary numbers for Zuma to survive – he would be absolved and allowed to continue as leader, and Mbete, by allowing the secret ballot, would look like a paragon of truth and justice, putting country above party.
“We are not convinced that the opposition, the ANC and the market are adequately prepared for a successful vote, which would require 201 of the 400 MPs to vote in favor of the motion irrespective of how many abstain from voting,” Rand Merchant Bank says in note to clients
Nonetheless, Bloomberg reports that opposition parties reported to have identified more than 50 ANC MPs who have indicated their willingness to vote in favor of the motion; if correct “market reaction will be a swift rally.” At the same time, RMB expects both the rand and bonds to give back all of yesterday’s gains and end a little weaker if vote fails. “If the vote succeeds, the immediate reaction will be a further rally in markets, followed by weakness due to potential instability and politically-driven conflict.”
Here is ING’s Chris Turner with the comprehensive vote preview:
A no-confidence vote in the Presidency of Jacob Zuma is scheduled at around 1430GMT today – to be precise a debate on the vote should start around 13GMT and is tabled to last 85 minutes.
The ZAR rallied yesterday on the news that today’s ballot would be secret, making it slightly more likely that 50 of Zuma’s ANC MPs could defy their boss, join the 151 opposition MPs and secure the 201 votes required to win the vote.
We see the Rand’s reaction to the vote as binary – USD/ZAR potentially testing 12.85/90 on a rejection of South Africa’s president since 2009 or alternatively rallying to 13.55/60 should the noconfidence vote fail.
The balance of risks probably favours an insufficient number of ANC MPs defecting, the vote failing and the ZAR weakening.
Finally, here are the mechanics of the vote:
- Starts at around 14:00 local time (13:00 BST/ 08:00 EDT)
- Full South African Assembly: 400 members (of which the ANC bloc makes up 249 MPs)
- Votes needed: 50% (or 201 votes) are needed in favour of the no confidence motion.
- Opposition holds just 151 seats, so assuming all opposition vote for the no confidence motion, then a further 50 of the 249 ANC MPs need to vote for it. That is one in five ANC MPs.