Difficult for investors to see ANC intentions - expert

Johannesburg - The ANC has a habit of presenting the outcomes of conferences so that their true intentions are very difficult to read and this makes it difficult for investors, according to Peter Attard Montalto, emerging markets analyst at Nomura.

With reference to the ANC's important National General Council (NGC), which took place over the weekend, Montalto said there was little to suggest any excitement at the upcoming mini budget (MTBPS) next week.

"The biggest outcome that has sparked some investor questions is that the ANC has mandated the government to pull South Africa out of the International Criminal Court.

This will likely be viewed negatively internationally, though the process will take around a year to complete.

It follows on from legal difficulties the government has had in not arresting Sudan President al-Bashir earlier this year.

"On the economic policy front there was no fresh thinking, though a number of further, small steps to the left could be seen on aggregate. We would characterise this more as a continuation of the current direction of travel as opposed to any particular shift."

In Montalto's view there was no real mention of the SA Reserve Bank (Sarb) at the NGC or broader macro-economic policy frameworks, including the rand, despite these being in the initial discussion documents.

"There was an interesting mention that expenditure within the fiscus should be rotated away from consumption towards investment.

"We will watch how the MTBPS takes this theme next week – especially as public sector wage settlements (that the ANC backed) have driven the balance in the opposite direction," Montalto said.

He said there was no mention of benefits extensions, though he believed this debate has continued in government.

"There were the usual pleas for better economic policy coordination and better cooperation with the private sector, but nothing has come of such wishes in the past."

The ANC said it was unhappy with NDP implementation and yet it is its own internal politics and those of individual government ministers that have prevented implementation, he commented.

"The ANC seems to have been hunting for leadership in this area and yet been happy to diminish the National Treasury’s role in economic policy oversight and is unlikely to look there for support in the future."

Other crucial issues for investors relating to the NGC in Montalto's view, include that the ANC wants to speed up the implementation of the National Health Insurance and with it funding - possibly through an increase in value added tax (VAT).

"The ANC is trying to dictate equity ownership structures in agriculture - despite worries about implications through WTO and relations with the US," added Montalto.

"A wealth tax was mooted, but there are deep divisions within the ANC on this - both economically and politically - and the National Treasury is firmly against it we believe. We expect no mention in the MTBPS."

Source http://www.fin24.com/Economy/Difficult-for-investors-to-see-ANC-intentio...