Markets are expected to react this week to the setting aside of charges against ANC president Jacob Zuma on Friday.

Any negative reaction would be primarily due to the uncertainty still surrounding the country's leadership, which will be cleared only after the national elections.

This was according to Brait economist Collen Garrow.

"The markets will start to digest the news more in the coming week," Garrow told Business Times yesterday.

Financials unmoved

The financial world was largely unmoved on Friday when Judge Chris Nicholson threw out corruption charges against Zuma, ruling that there might have been political interference in his prosecution.

Garrow said even though charges against Zuma had been set aside there was still uncertainty about the country's leadership, any pending changes to economic policy and a clear election date.

"The volatility will continue to grow, weighing against the rand, equity markets and bond markets," said Garrow.

The uncertainty would be viewed unfavourably by investors and it could encourage selling by foreigners early in the week, weakening the rand further.

"Investors don't like uncertainty"

"Investors don't like uncertainty and are likely to disinvest from an uncertain economy until there is more stability. Markets are looking for clarity and we will only get that clarity after the elections," he said.

But T-Sec economist Mike Schussler said local markets would not be moved by Friday's ruling.

"Local markets are watching global commodity prices and the rand/dollar exchange rate; they won't react much at the moment to a court case," he said.

Garrow disagrees: "Political risk is important because rating agencies Moody's, Fitch and Standard & Poor's look at both economic risk and political risk when rating an economy. Political leadership determines economic policy and succession planning within a country is one of the elements that goes into political risk."

In his judgment on Friday, Judge Nicholson stressed that his ruling did not touch on guilt or innocence, and said prosecutors could file charges again.

"I say don't charge him"

Garrow feels it is important to weigh recharging Zuma against what it would do to South Africa's image.

"I say don't charge him, put it aside because it seems that there is a host of other people involved in the corruption charge.

"The loss of credibility against the national brand is far greater than the corruption and racketeering charges — which are not much in monetary terms."

There has been concern that left-leaning Zuma ally, Cosatu, could pressure him into changing economic policies that are pro-business, thus tampering with economic growth and development.

But Garrow said some of Cosatu's "protectionist policies such as a focus on job creation would be good for our economy".

Zuma has tried to reassure international investors that he is committed to South Africa's growth and the private sector.

Business Times