DAVOS, Switzerland (Reuters) - The appointment of a new leader of South Africa’s ruling party has removed political uncertainty that contributed to the depreciation of the rand currency and has been welcomed by investors, the country’s central bank governor said on Wednesday.
The new leader of the ruling African National Congress (ANC), Cyril Ramaphosa, narrowly won the race to succeed President Jacob Zuma as party leader in December.
South Africa’s rand currency has surged since Ramaphosa - the deputy president - won the contest. It steadied against the dollar early on Wednesday, holding at a two-and-a-half-year high. At 0645 GMT it traded at 12.0300 per dollar. [nL8N1PJ0UE]
“The depreciation of the rand last year was overdone and it was overdone because there was so much political uncertainty,” said South Africa Reserve Bank Governor Lesetja Kganyago.
“High frequency indicators in South Africa do show that the South African economy is demonstrating a resurgence,” he told Reuters speaking on the sidelines of the World Economic Forum meeting of business and political leaders in Davos.
“For a long time we had spelled out that the exchange rate is sensitive to the political uncertainty. The uncertainty is gone,” he added.
South Africa’s economy - the second largest in Africa and the most industrialized on the continent - has slowed to a near-standstill over Zuma’s two presidential terms.
“From the meetings here in Davos, a lot of investors are actually very positive about South Africa. They think that the institutions of our democracy are solid and these institutions have demonstrated their resilience,” said Kganyago.
“Investors are now clear that when they make investment decisions they can make decisions based on a more certain political environment. They are clearly optimistic about the changes in leadership.”
Earlier this month Ramaphosa said South Africa wants to attract foreign investors to help it kick-start economic growth and will crack down on corruption. [nL8N1P8088][nL8N1P8088]
South Africa’s central bank this month kept its benchmark repo rate unchanged at 6.75 percent. It also kept them on hold when it met in November. [nL8N1PD4B1]
The governor at the most recent meeting warned that risks to inflation were still on the upside despite a recent strengthening of the rand.
During his ANC party leadership election campaign, Ramaphosa vowed to address record unemployment and a sluggish economy. Markets have rallied since Ramaphosa’s victory, however some analysts are skeptical that he will deliver on his promises.
Writing by Alexis Akwagyiram; Editing by Toby Chopra