What's going on?

South African investments soared Monday, and the braai really got going on Tuesday, after a new leader of the ruling African National Congress party was elected � investors are hopeful that it�s the beginning of significant economic reform within the country.

What does this mean?

Cyril Ramaphosa, whom Nelson Mandela wanted to be his heir, has promised to root out corruption and promote other business-friendly initiatives, including getting a grip on government spending. He prevailed over the current president�s ex-wife, who ran a campaign largely based on continuing her former husband�s policies.


The turnaround won�t be immediate. Key allies of Jacob Zuma, the current president, won various important seats on the party�s governing council, meaning Zuma is likely to serve until his term ends in 2019 (Ramaphosa will stand for election in 2019). So while today may be a step in the direction of a more stable fiscal policy, there�s still a long walk to go.

Why should I care?

For markets: South Africa�s currency is up 15% versus the dollar in the past month.

International investors like to invest in countries where economic growth can flourish. Strong laws and low corruption usually help achieve that. South Africa has drifted away from that description in recent years, but the hope is that Ramaphosa at the tiller will plot a course back there. Investors betting on that outcome are already buying the rand, thus pushing up its value (South African stocks and bonds also rose following the news).


The bigger picture: This helps cap a very good year for emerging market (EM) investments � but there are risks on the horizon.

EM investments have been among the best performers in 2017. But, as the International Monetary Fund (IMF) warned on Tuesday, there are still plenty of risks in the EM space. The IMF specifically pointed to the high level of debt inherent in emerging markets, and the potential for rising interest rates to hamper companies� ability to pay it back.