South Africa’s President, Thabo Mbeki resigned yesterday (21 September 2008). The writting was on the wall for this resignation after the ruling ANC party had asked the president to step down following allegations he abused power in the corruption case against new party leader Jacob Zuma. Mbeki told the nation in a live televised broadcast last night he had tendered his resignation which would become effective from a date to be determined by Parliament, which is meeting on Monday. The question on many peoples lips right now is, how will Thabo Mbeki’s resignation affect the economy?

Strictly speaking, in the short term, we will not see many drastic changes. The rand may move up or down slightly but nothing serious as foreign investors take the ‘let’s wait and see approach’. What will help is the fact that this resignation was handled quickly and swiftly without a lot of noise and fighting from political leaders in the ANC. It could have turned ugly if Mbeki had refused to step down after having been told by his fellow party members to step down.

There had been suggestions that a lot of cabinet members would also step down after Mbeki leaves. But it looks like for now, the majority of ministers in South Africa are going to stay on in their posts. A key ministry especially when it comes to the economy is the Ministry of Finance which is lead by Trevor Manuel. It does not look like Manuel will be stepping down from his position which means he will stay on and continue to implement his policies which seem to have been doing well for the local economy.

Many will look at how the local markets open today in South Africa and may expect to see them in the red today following Mbeki’s resignation. But chances are, what ever happens on the local markets in the next couple of days will not be directly attributed to the Mbeki resignation but more towards the global financial crisis and its effect on risk aversion. Local markets do not like uncertainty and the react when there is uncertainty in the air. For now we know that Mbeki will no longer be president and that a caretaker president is going to be put in place. This can only bode well for the markets. It would be been different if there was uncertainty with regards to ‘what next’ for the South Africa government and its leaders.

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