Ramaphosa represents the Mandela legacy

RYK VAN NIEKERK: On the line from Copenhagen, Denmark, is Steen Jakobsen, the chief economist and chief investment officer of Saxo Bank. Steen, thank you for your time, we have a new president in South Africa, we’ve seen the controversial resignation of Jacob Zuma on Wednesday night, what do you make of these developments and the impact it may have on South Africa?

STEEN JAKOBSEN: First of all, I think it’s an extension of what we already saw in local politics over the last two to three years. For me as a business visitor to South Africa two or three times a year I have seen how the despair was increasing in South Africa. At the same time, I was perplexed that people didn’t recognise the fact that at local politics level there was already a power sharing. I have been very bullish on South Africa on exactly that because basically from grassroots up we have seen a change from one kind of leadership to another, both of them were terrible, and now we have an ability to navigate in a political environment where you have a shared powerbase.

So, for me it’s very positive, I would presume Ramaphosa, with the credentials he has and we have to remember he is more like Mandela – I’m not saying he is Mandela – but he is more Mandela in education than both Zuma and Mbeki were. So, I think it’s a clear sign that things have turned and I think the South African rand has reflected that, I still consider the South African rand very cheap and I still say that South Africa is one of the countries in the world that has its own destiny in its hands, in other words if you can create the reform, if Ramaphosa is able to level out some of the corruption and the cronies left in the administration then I think South Africa has a massively positive future.

RYK VAN NIEKERK: Let’s talk about the exchange rate of the rand, we have seen a strengthening of the rand against the dollar, although there was some dollar weakness that contributed to that, what do you think the medium to long-term trajectory of the rand is?

STEEN JAKOBSEN: Over the last ten years the rand has been in a range to the dollar of six at the low and 17 at the high and we are at 11.67 as we speak. I think easily the rand could be at ten, I think it could even be at nine in the intermediate future.

I do, however, think that politics is like a swinging pendulum, I don’t think the ANC is finished figuring out what it wants. I would not be surprised as an outsider looking into South Africa that the ANC actually splits in two down the line, before or after the next elections in 2019. So, there will be back and forth and, of course, one of the short-term issues that Ramaphosa will face in terms of external investors is clearly to get the rating up again. But I think…is very high with the international institutions, I would not be surprised to see within the next six months that you actually get an upgrade in South Africa and I think overall that will, of course, strengthen the currency, whereas for many years was advocating that an investor…I think you need to have…especially on the overseas money they really have to have an…exposure to the South African rand from here onwards.

Interest increases in trading rand against other currencies

RYK VAN NIEKERK: Saxo Bank is, of course, a big forex trader, have you seen some interest in trading rand against other currencies in recent times?

STEEN JAKOBSEN: The South African rand is a very large component in the emerging market space. I would say a lot of people have not agreed with my view on the South African rand with political change happening on the ground and it was all positive, so we’ve seen some interest there in the last two to three weeks, we can certainly see in the research we do. But I have to say I have been a single voice in Saxo Bank on the South African rand and even including our clients but I’m getting a lot of questions now exactly for the reason that I have been very positive about the rand.

So, we have seen increased interest, the first real interest we’ve seen in over five to six years, I think most people perceive the South African rand to be a currency of weakness. But I think people are starting to look at it as a clear opportunity going forward.

RYK VAN NIEKERK: That is in many ways good news for us. What would you want to see in the next few weeks and months that will solidify this positive outlook of yours?

STEEN JAKOBSEN: What Ramaphosa needs to do is convince investors that there will be reform. I will very much be looking at the tone of his programme, the tone of what he is looking for. I may be a naïve Scandinavian economist but I’m really looking for me Mandela-like unity, equality, less corruption and creating a South African society that works together, instead of what I have experienced on the ground in the last two to three years, where everyone is scared, the far left, the far right, all the parties are running scared.

So, I want to see a positive attitude, I want to see a programme from Ramaphosa and I think the early days of him being ANC leader and now getting to be president is very, very good. He is not aggressive but he is pushing the envelope in terms of what can be done. So, I definitely want to see his programme but just remember with politics it’s not about what you do but it is whatever kind of credibility you’re trying to install. Clearly Zuma had zero credibility, I think Ramaphosa has a very high degree of credibility but he needs to show that through having a programme that actually in its spirit is working towards equality, working towards getting utilities up and running again, the school system needs to be addressed, all these things are very difficult tasks to take on but they need to be taken head on and that’s how you create credibility by actually facing the real issues in South Africa today.

RYK VAN NIEKERK: Thank you, Steen. That was Steen Jakobsen, he’s the chief economist and chief investment officer at Saxo Bank.

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