South Africa is the latest country to be closely watched by UK investors. A decent number of companies doing business in that part of the world have their shares traded on the London Stock Exchange.

Cyril Ramaphosa was last week sworn in as the new president of South Africa, replacing Jacob Zuma who stepped down after pressure from the governing ANC party amid corruption allegations. Ramaphosa wants to boost the economy and create jobs.

Reviving the country’s economy would be positive for the likes of financial services groups Investec (INVP) and Old Mutual (OML), both of whom have their shares traded in London.

Other London-listed stocks with South African operations include private healthcare group Mediclinic (MDC) and showers-to-bathroom accessories specialist Norcros (NXR).

ALL CHANGE FOR MINERS?

Perhaps the one sector really hoping for change is mining, of which there are many South African-focused constituents trading on the
London Stock Exchange.

Ramaphosa was general-secretary of the National Union of Mineworkers in the 1980s and has previously been a director at platinum producer Lonmin (LMI).

He’s already called for a review of the latest mining charter in South Africa which last year came under fierce criticism by the mining industry.

The charter called for a new 1% royalty on turnover to go to local black communities, greater local community ownership rights and rules that mandate majority employment of black staff and procurement of services from black-owned businesses.

Critics said it would greatly push up costs in the mining industry, hurt already-wafer thin profit margins in the platinum sector and act as a deterrent to new investment.

A reworking of this charter could help to fuel shares in South Africa-focused miners on the UK stock market, including Petra Diamonds (PDL), Anglo American (AAL) and Tharisa (THS).

WHAT HAPPENS NEXT?

‘With Ramaphosa – a former union leader and subsequently a very successful and now wealthy businessman – leading the country, we expect to see a cleaning out of all those implicated and a restoration of the strength of institutions South Africa has always had,’ says Oliver Bell, portfolio manager of the T.Rowe Price Middle East & Africa Equity fund.

Bell says the political developments come at a time when South Africa is at a cyclical economic bottom.

He believes the government needs to show commitment to fiscal consolidation. Bell reckons this could lead to a delay in the credit rating downgrade by Moody’s and thus lead to interest rate cuts by the ‘staunchly independent’ central bank and reinforcing the ‘positive virtuous circle’.

He adds: ‘Positive macroeconomic figures may surprise in coming quarters – largely due to underestimated pent up demand and a restoration of confidence, which will then be reinforced by likely structural reforms from the new government.’

Liberum analyst Ben Davis last December said that Ramaphosa was the business-friendly choice in the ANC elective conference, saying a presidential victory for him could lead to a re-rating in equities.

However, Ramaphosa still has a considerable challenges ahead, so don’t assume all South Africa-focused shares are an easy ticket to portfolio profits. You also have to consider that currency strength in the rand as a result of his election could work against miners who earn in US dollars. (DC)

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