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GeoPulse Week Ahead (G-20): October 17
October 17, 2016
GeoPulse generates real-time political risk analysis across the G-20
South Africa: Battle over finance ministry and student protests make for a risky week
US: Political violence (still) on the uptick
Russia: Divergence between macro-policies (good) and regulatory risks (bad)

South Africa: Battle over finance ministry and student protests make for a risky week
As anticipated, governance risks in South Africa have (and will continue to) increase due to factional battles in the ruling ANC over control of the powerful finance ministry and related investor concerns about macro-economic policy-making and political stability. Meanwhile, social risks -- typified by the sometimes-violent student protests currently roiling the country's top universities -- are also on the rise, albeit tapering off from previous weeks.

Neither Finance Minister Pravin Gordhan nor President Jacob Zuma are likely to be forced out of or resign from their positions in coming weeks, but political instabilities in the ANC will continue to drive speculation over both outcomes, fueling market volatility and increasing the chances of a (arguably overdue) sovereign ratings downgrade.
Indeed, while historically strong institutions and macro-economic stability keep the level of governance risks relatively low (at least versus social risks), the heightened battle between Zuma/allies and Gordhan/allies over control of key institutions (including the ANC itself) is clearly forcing political risk higher; heightened social risks just add fuel to the fire.
South Africa's solid institutions -- especially the judiciary, central bank, and robust civic organizations -- will likely survive the current political uncertainties, with Zuma and allies ultimately losing control of the ANC by the next party conference in December 2017. In the interim, however, political risks will continue to rise.

US: Political violence (still) on the uptick
As the presidential election enters its final phase, GeoPulse's earlier projections concerning an increase in political violence look both prescient and likely to persist, especially in light of GOP candidate Trump's heated warnings about a "rigged" election on November 4.

Per this snapshot of top-line political risks in the US, GeoPulse continues to read elevated risks of political violence (pushing up the brown 'Security' risk line) and social instability (see the green 'Social' risk line) in the run-up and immediately following the presidential election. Overall political risk will correspondingly increase but then stabilize by the middle of next month, helped in large part by stable governance risks in the world's oldest democracy.

Russia: Divergence between macro-policies (good) and regulatory risks (bad)
As reflected in Fitch's move last week to raise the outlook on Russia's BB sovereign rating from "negative" to "stable", Russia's overall macroeconomic policy responses to its oil-driven economic downturn remain a risk deflator for the country. At the same time, GeoPulse's projections of regulatory risk are increasing on the back of growing geopolitical tensions (again) with the US and Europe.
