How to Profit from South African Political Crisis

Supporters of Julius Malema, the controversial president of the African National Congress Youth League, clashed with police in South Africa ahead of a disciplinary hearing that could have a a major impact on the future of South Africa. Although Malema played a pivotal role in the election of South African President Jacob Zuma, the relationship between the two leaders has become more strained over the past few years and the young Malema may even be planning to challenge Zuma for the leadership of the African National Congress. A few years ago Malema said that he would kill for Jacob Zuma and even went so far as to say that the woman who accused Zuma of rape had a "nice time". However, the two men no longer see eye-to-eye and Malema has become a political liability for Zuma as well as a direct threat to Zuma's role as leader of the African National Congress and South Africa. Julius Malema is popular with the poor and the young but he has increasingly been at odds with South Africa's leadership because of the radical policies he advocates, which could devastate the country's economy. Malema openly advocates the nationalization of South Africa's mining industry and the seizure of land from white farmers. If Malema were ever to get his wish, it would likely be a great blow to South Africa's economy. South African business leaders fear a repeat of what happened to neighboring Zimbabwe after President Robert Mugabe enacted reforms similar to the ones called for by Malema. Zimbabwe's once vibrant farming sector is in ruins, the country has found itself the target of American and European Union sanctions and life expectancy for the average Zimbabwean male has dropped from 60 years in 1990 to 42 years today. Julius Malema's most recent political troubles stem from his call for the overthrow of the democratically elected government of neighboring Botswana. Malema could be suspended or even expelled if the disciplinary hearing doesn't go in his favor. Although some have predicted that expulsion from the ANC would be the end of Malema's career, he has said that such an outcome would only be a "setback for the revolution we are pursuing". There are a number of investment options depending on how traders see the current South African political crisis playing out. If Malema is suspended or expelled from the African National Congress, shares of South African mining stocks like AngloGold Ashanti AU, Gold Fields Ltd GFI, Harmony Gold Mining HMY and DRDGOLD Ltd DROOY could climb higher. Although Malema has vowed to fight for his reforms regardless of how the ruling goes, his removal from a formal leadership position in South African politics would be seen as a positive by investors in the country's mining industry. The the iShares MSCI South Africa Index EZA and the WisdomTree Dreyfus South African Rand SZR may also benefit if Malema is removed from the picture because the outlook for the entire South African economy would improve for most investors. If Malema is allowed to remain the leader of the African National Congress Youth League or is removed from office and the current protests escalate, investors may want to consider taking short positions in some of the securities mentioned above. Regardless of the coming decision, Julius Malema has a huge following in South Africa and may not go quietly if the country's establishment attempts to end his political career.