South Africa's parliament
is expected to elect an acting president this week, following the resignation
of President Thabo Mbeki this past weekend. Many observers and some officials
of the ruling party, the African National Congress, say the party will nominate
deputy party chief Kgalema Motlanthe. The new president will serve until
elections are held in about seven months.
Financial analysts say the political transition
in South Africa could lead to investor concerns about the country’s economy
Taimur Ahmad is the editor of Emerging Markets
magazine in London.
“Any political transition entails risk, even if
it is an orderly transition, “says Ahmad, “and there are concerns that it could
be more volatile than what has been laid out.”
Ahmad notes that the change comes as the economy
is already weakening, with the rand dropping sharply against the dollar and
other major currencies and high interest rates depressing consumer spending.
Growth is also thwarted by shortages of electricity, which are affecting
industrial output. As a result, the economy is expected to grow at about four
percent this year, somewhat less than in recent years.
Ahmad says problems in the US financial sector
and slowdowns in the US economy have led to a decline in private western
investments in emerging markets, including South Africa.
Economists recommend that at this time, South
African leaders assure investors that political transition does not mean
“The most important thing is
signaling policy continuity,” says Ahmad, “[for example], that they want to
keep key ministers in place during this interim period. What you don’t want is
a whole cast of new characters or unknowns.” He says South Africa’s leadership
will need to get its fiscal house in order with a minimum of volatility.