Banks face a bloodbath on the JSE as Ramaphosa's anxiety mounts

South Africa's political unrest over the future of President Cyril Ramaphosa has caused a massacre on the JSE, with the rand sinking and banking companies falling.

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Yesterday, bank stocks plummeted by almost 10%, with Absa leading the way with a 9.6% decline to R185.40 a share, followed by Capitec with a 9.3% decline to R1 836.31 per share.

FirstRand and Nedbank saw their share prices decline by 9.2% and 8.8%, to R60.79 and R208.45, respectively.

This was in response to reports that Ramaphosa was thinking about stepping down in light of early indications that he may have engaged in serious misconduct.

As the news gripped the markets and alarmed investors, the rand dropped more than 3% to R17.90 to the US dollar in intraday trade, its lowest level since November 4. By 5 pm, the rand had pared its losses to R17.66 to the dollar. By 5 o'clock, the rand had fallen R1.41 to R21.71 against the pound and R1.02 to R18.59 against the euro.

Ramaphosa may have a case to answer for failing to report the burglary in which millions of rands in foreign currency were stolen at his Phala-Phala farm in Limpopo in February 2020, according to the independent panel of experts appointed by Parliament and presided over by retired Chief Justice Sandile Ngcobo.

Ramaphosa should be subject to more investigation, according to the Section 89 Independent Panel's preliminary findings that he may have broken his oath of office and violated a provision of the Prevention and Combating of Corrupt Activities Act.

A few weeks before the crucial ANC elective conference, where Ramaphosa is running for re-election, the news sent shockwaves through the local markets and put pressure on the rand. Ramaphosa is the preferred presidential candidate of investors.

Stocks may trade weaker for a considerable amount of time due to uncertainty, according to Nolan Wapenaar, co-chief investment officer at Anchor Capital.

Wapenaar added that the rand's movement was a sharp contrast to what was happening globally.

The domestic market has been shocked by the Phala Phala events, Wapenaar said. “South African-centric equities, domestic bonds, and the rand have lost value while the market assesses the impact on domestic politics and the ability of the government to continue with its drive toward rebuilding South Africa,” he said.

“This will probably affect domestic assets for some time.”

The National Executive Committee (NEC), the governing ANC's highest decision-making body between conferences, will meet urgently today, Friday, to consider the report's ramifications.

The report will still be discussed and decided upon by Parliament the following week.

The Section 89 procedure has presented a “exceptional and extraordinary time,” according to Ramaphosa, who made the claim in a statement on Wednesday.

He did, however, reaffirm the claim he made in his contribution to the panel and cleared himself of any role in the Phala-Phala crime's cover-up and ensuing alleged covert pursuit of suspects.

In addition to trying to uphold my oath throughout my time as president, Ramaphosa stated, “I have tried to set an example of respect for the Constitution, for its institutions, for due process, and for the law.”

“I unequivocally deny that I have broken this oath in any manner, and I also deny that I am responsible for any of the claims made against me,” the person said.

In the meantime, the business community commented on the disaster.

The CEO of Business Unity SA, Cas Coovadia, stated that this crisis was significant for the nation and posed significant risks that would result in further loss of confidence and instability in the political environment, particularly in the lead-up to the ANC Electoral Conference.

At a time when business is devoted to devoting resources and capacity to engage with the government to address multiple challenges in South Africa, Coovadia stated, “Our country can ill afford further erosion of confidence and instability.”

In order to send a clear message to people, investors, and others that authorities are capable of responding decisively to this situation, we need clear direction on this within the next few days.

According to Business Leadership SA, the fact that claims against Ramaphosa had been looked into was a proof that South Africa's democracy and its institutions were in good shape.

The statement read, “It is now crucial that our institutions are supported in concluding investigations and, if necessary, taking further actions to prosecute or otherwise impose appropriate consequences without fear or favor.”

We also want to urge all other government agencies that are looking into this issue to finish their investigations and present their findings.