South Africa: Markets Don't Care About Elections. or Do They?

The Electoral Commission of South Africa's Twitter page on May 6, 2019.

Like the election itself, South Africa's markets are in a quandary. The economy is in a poor state, but SA's stock markets are verging on record levels. That quandary poses a difficult question: What are SA's markets anticipating -- and what will happen if their expectations are dashed?

It's a cliché by now, but if there is one thing the stock market does not like, it is uncertainty. And elections, by their very nature, create plenty of it.

South Africa is not Zimbabwe or Venezuela or the DRC. The concern is not whether the election will be free and fair on the day -- after five rounds of national elections since 1994, voters have a reasonable amount of faith that the electoral system works.

Yet it feels like the stakes have never been so high, and an election so fiercely contested. Voters on both sides of the centre are disillusioned. The economy is stagnant, jobs are scarce and political rhetoric is high. Voters are impatient for results and action.

The markets reflect this. They have priced in the poor economy, rising levels of government debt and the absence of reforms needed to kick-start growth. A good yardstick on how much...

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