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EDINBURGH — South Africans reacted with outrage and disappointment after President Cyril Ramaphosa announced that the ANC has decided to amend the Constitution in response to calls for land expropriation. Former opposition leader Tony Leon said on Twitter: “Last night
@CyrilRamaphosa bade farewell to Constitution and National Development Plan having helped author both. If he can toss these away so lightly along with his credibility – what’s next?” MP John Steenhuisen commented: “Committee has not fully deliberated, nor even considered, the hundreds of thousands of written submissions. Debate has not taken place – government by announcement!” The rand fell after Ramaphosa’s television appearance late on Tuesday night, but its value improved a little later on Wednesday. For Old Mutual economic research boss Johann Els, the reason the rand pared its decline is because traders see positives in the ANC clarifying land expropriation conditions. Old Mutual, a listed life assurer, is South Africa’s second-largest investor in bonds. Other analysts, including in London, agree that certainty about the land reform process is appreciated. – Jackie Cameron
(Bloomberg) – South Africa’s rand pared a decline as some investors took the view the ruling party’s proposal to speed up land redistribution would reduce uncertainty that has weighed on the nation’s assets.
The African National Congress decided to amend the nation’s constitution to make it clearer under what conditions land can be expropriated without compensation, President Cyril Ramaphosa said late Tuesday. While some investors are concerned that this would undermine property rights, others say it would clarify the land-reform process.
“It’s a positive,” said Johann Els, the head of economic research at Old Mutual Investment Group Ltd., the second-biggest investor in South African government rand bonds, with R30 billion ($2.3 billion) of holdings, according to data compiled by Bloomberg. “They want to set out the conditions under which expropriation will happen. It will set out the framework within which the constitution should work.”
The rand was little changed at 13.2834 per dollar by 1:54 p.m. in Johannesburg after weakening as much as 0.8 percent earlier.
The currency dropped 0.9 percent late Tuesday after Ramaphosa announced the proposal, which underscores the ANC’s precarious hold on a majority as it heads to the ballot box next year. Television footage of impassioned pleas from citizens at public hearings across the country to change policy on land may have spurred the party into action, as it risked surrendering leadership of the debate – as well as votes – to the populist Economic Freedom Fighters opposition party.
Clarifying land-expropriation procedures in the constitution would be “a step in the right direction as it takes South Africa closer towards a rule-based policy approach,” Min Dai, a London-based emerging-markets fixed-income strategist at Morgan Stanley, said in a report. Morgan Stanley is neutral on the rand and recommends long-end government rand bonds. “Clearly, the details of the amendment are important to watch.”
Still, options traders are positioning for wider price swings in the rand in coming days as details of the proposal become clear. The rand’s one-week implied volatility against the dollar, based on the prices of options to buy and sell the currency, climbed 109 basis points to 15.8 percent.
Any erosion of property rights would “dent investor sentiment, and specifically foreign investors, as it creates a big risk,” said Christopher Shiells, the London-based managing analyst for emerging markets at Informa Global Markets. “There remains uncertainty over under what conditions expropriation will take place, and details need to be cleared up.”
Yields on benchmark 2026 government rand bonds jumped six basis points to 8.64 percent. Rates on dollar-denominated debt due 2028 rose nine basis points to 5.57 percent, the highest in almost a month on a closing basis, while the cost of insuring the nation’s debt using credit-default swaps increased six basis points to 187.
“There is lots of anxiety about what this will mean for the economy,” said Halen Bothma, an economist at ETM Analytics in Johannesburg. “Politicians have tried to talk down the negatives, but obviously news like this will play on investor fears on the South African economy.”
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.