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Speaker of parliament, Baleka Mbete, has (much to the surprise of many) announced that the vote of no confidence against South African President, Jacob Zuma, will be done via a secret ballot (on the 8th of August 2017). The vote of no confidence will be the 6th such vote in Jacob Zuma’s tenor as president, although this time there is a clear factional divide within the ruling African National Congress (ANC).
The maths
There are 400 members of parliament (MPs). To pass a vote of no confidence, 201 votes are needed. The ANC holds 249 of these votes and opposition parties hold the remaining 151 seats. While most opposition parties appear united in the cause to remove the president, there are about 5 opposition votes that are unlikely/uncertain in terms of supporting this cause. As such, the assumption is, that a minimum of 55 members of the ruling party will need to defect to pass a motion of no-confidence in the president.
But will they?
While this is possible (as we know that there is divide within the current ruling party), is it likely? One key consideration here is that a vote by a defecting ANC member to remove the president, is also a vote to lose his or her’s own job, as if the president is removed, the constitution dictates that his cabinet must step down as well. While some ANC parliamentary members have been vocal about their unhappiness with South Africa’s current leader, we do not think there is enough support to pass the motion of no confidence and perhaps even less willingness to invoke career suicide. However the fact that the vote will now be held in secret presents an outside chance that those MP’s who have been voiceless/fearful thus far, vote with the opposition.
How will markets react?
The rand has been a barometer of political uncertainty within the country. The currency immediately strengthened on the news that the vote of no confidence will be a secret ballot. This would imply market support for the increased possibility of the president being removed. Ironically should the president and his cabinet be removed, one would think that this would promote further policy uncertainty and be net negative for a domestic currency.
With this in mind, if our most likely scenario occurs, which is that the president retains his job, perhaps a short term weakening of the rand can be expected. South Africa’s Top40 bourse see’s nearly 70% of earnings derived in foreign currency, so essentially a weakening rand would be positive for the index’s movements.
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