By Yaseen Kippie
At a presentation on its Islamic investment funds, Kagiso Asset Management laid out its research on the effect of current South African politics on the economy and global markets.
Kagiso offers an Islamic equity fund, which has delivered 21% return in the last year, and a retirement Islamic balance fund. The Sharia funds have attracted many non-Muslims, who view the funds as an ethical form of investment, with its prohibition of interest under the AAOIFI laws, laid down by Mufti Taqi Usmani of Pakistan.
Abdul Davids, head of research at Kagiso, says there are three potential outcomes of the ANC National Elective Conference later this month.
“We have assigned probabilities to each outcome, with a Cyril Ramaphosa win being the high road scenario. It will bring a high trajectory of growth and is the best case scenario.”
Davids sees a Nkosazani Dlamini-Zuma win as the worst possible outcome.
“It will mean the continuation of the economic status quo, of very low growth and increases in government debt. Rating agencies will give futher downgrades.”
The global market will nonetheless have a positive effect on its investments, independent of the result of the ANC NEC. Davids says Kagiso’s duty is to protect the clients capital, given the political uncertainty.
“ We have well diversified portfolios for clients globally. In an environment where we do see a negatative outcome, where the rand weakens, global currencies will increase and thus global companies benefit. This will give our clients a growth in their global investments.”
A third outcome Davids outlines is a Zweli Mkhize win, which he calls the “compromise candidate”, and could be as a result of the choice of preventing a split in the ANC between those who support CR17 and NDZ.
Davids says that “while each one of the scenarios have different eccnomic and equity markets, and we have modelled for all of them, the voting on the day will not necessarily be based on economic policies, but an emotional investment into the candidates.”
Ramaphosa would be the ideal candidate according to Kagiso, “even if NDZ adopts Ramaphosa’s policies. It will still be negative for the economy and stock market.”