Political Risk Analysis - Elective Conference Scenario Analysis: Risks To Economic Outlook Skewed To The Downside - FEB 2018

BMI View: The tightly contested nature of the ruling ANC's December elective conference suggests alternatives to our core scenario - of a win by Deputy President Cyril Ramaphosa - are likely. In this article we examine the prospects for a win by pro-Zuma ca ndidate, Nkosazana Dlamini-Zuma or a compromise candidate , both of which would significantly undercut prospects for reform. We also look at an upside scenario, examining what a 'landslide' victory by Ramaphosa could mean for the South African economy.

This article comprises the second in our two part series examining South Africa's upcoming December 16-20 national elective conference. In our first article, we outlined our core view for a tightly fought victory by Cyril Ramaphosa, leading to gradual reforms ( see, ' Elective Conference Scenario Analysis: Ramaphosa To Win, But Struggle With Reforms ', December 8). In the second part of this series, we consider the alternative scenarios. As indicated in the table below, the risks to South Africa's economic trajectory are heavily skewed to the downside. A number of the alternative scenarios - including a victory by Dlamini-Zuma or a compromise candidate - would not only weigh on investor confidence but derail prospects for reform over a multiquarter time horizon. Moreover, while not a separate scenario, we highlight a key risk that legal challenges to the conference could create further uncertainty and delay. Even in the best case outcome (a landslide win by Ramaphosa), stronger growth and fiscal consolidation will take considerable time to move ahead, given structural obstacles.

Alternative Scenario 1 (Upside Risk): Ramaphosa Wins And The Reformists Win Big

Investor Friendly Policies Offer Long-Term Growth Potential
South Africa - Real GDP Growth Under Each Scenario, %
Source: SARB, Statistics South Africa, BMI

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