Top executives at Merrill Lynch in Johannesburg said foreign fund managers attending its annual South Africa and sub-Saharan Africa investor conference this month cited political risk in Africa’s biggest economy as an issue.
Some foreign investors worry that Zuma’s trade union and Communist allies are pushing him to adopt pro-poor policies at the expense of big business, particularly if widely-respected Finance Minister Trevor Manuel steps down.
Local investors, however, were not concerned about any shift away from business-friendly policies after an April 22 election when Zuma is expected to be become president, and Merrill Lynch said foreigners would be wrong to fret.
"For offshore investors, it’s at the front of people’s minds — the credibility of a Jacob Zuma presidency, a possible change in policy, they were asking those questions," said Winston Monale, head of equity sales at Merrill Lynch South Africa.
"Local investors don’t care. It’s not a case of investor apathy, but we have seen big political changes here and markets continue to function. I don’t think there’s any more political noise in the local market."
Zuma, who has insisted he will stick to policies championed by former president Thabo Mbeki, told Reuters on Friday South Africa’s economic policy would not swing to the left.
"There is no lurch to the left," said Clifford Sacks, co-chief executive officer at Merrill Lynch South Africa. "The ANC hasn’t dropped the ball yet, I think locals are starting to give them the benefit of the doubt and I think foreigners will start to do that soon too."
Merrill said 48 investment institutions and 53 companies attended the conference, about the same level as last year despite the global financial crisis, with about two thirds of investors coming from overseas.
The executives noted a gap between relatively optimistic local investors and fund managers from abroad, many of whom believed South African companies had not fully accounted for the potential fallout from the global crisis.
South African banks have escaped the worst of the global financial meltdown thanks to strict exchange controls and conservative lending practices that protected them from the toxic assets that have felled global peers.
But the economy has slowed sharply as demand for exports falls and consumers have reined in spending.
"There is a disconnect between international and domestic investors," said John Morris, Merrill’s South Africa’s investment strategist, noting consumer staple stocks attracted most interest. "The domestic investors are much less pessimistic on the outlook."