Investors Comforted by Continuity in Key Ramaphosa Ministers
Investors Comforted by Continuity in Key Ramaphosa Cabinet Picks
(Bloomberg) -- The relief among investors was clear to see as they assessed President Cyril Ramaphosa’s South African cabinet line up.
When it comes to the key jobs of managing finances and overseeing reform of the country’s bloated and faltering state-owned companies, it turns out that continuity is crucial in calming the markets. Ramaphosa retained Finance Minister Tito Mboweni and Public Enterprises Minister Pravin Gordhan in their posts as he named a slimmed down executive on Wednesday evening.
The rand was little changed as of 5:10 p.m. in Johannesburg Thursday, after gaining as much as 0.6% against the dollar earlier, and following its rally Wednesday as Ramaphosa read out his ministers’ names in Pretoria. South Africa’s main stock index climbed 1.3%, the most in eight weeks, as banking and financial shares made the most of the stronger local currency.
Here are some views on the cabinet line-up:
Natalie Rivett, senior emerging-markets analyst at Informa Global Markets in London
- “The market ultimately wanted to see some continuity with Mboweni and Gordhan retaining key positions, and a slimmed down cabinet. Ramaphosa has delivered in that respect. Attention will now be turning to economic reform. The market will want to see efforts being made to boost growth and shore up finances, and key will be how Eskom’s problems are tackled”
Shireen Darmalingam, macro strategist at Standard Bank Group Ltd. in Johannesburg
- “Positively, the majority of this new cabinet is pro-CR (Cyril Ramaphosa). We now foresee the expected reforms imminently. Moody’s ratings agency believes that such reforms will stem a downgrade.”
- Cabinet should be rand-supportive. Standard Bank sees currency as undervalued and sees it strengthening to 13.40 per dollar in the second half of the year. There are, however, ongoing global risks, such as global trade, which might constrain rand gains.
Ryan Woods, head of trading, Independent Securities
- The key positions remain in good hands. Despite pressure from South African graft ombudsman, Gordhan stays on, which is good news. Mboweni is left in charge of the purse strings, continuity of policy is important.
- Appointments of Ronald Lamola in justice ministry and Barbara Creecy in the environment portfolio “are inspired choices”
- Negatives are appointments of David Mabuza, David Mohlobo, Lindiwe Zulu and a few others that are “apologists” for former President Jacob Zuma
- Cabinet still bloated, with far too many deputies
Warwick Bam, head of research at Avior Capital Markets
- Cabinet appointments signal that influence of the Congress of South African Trade Unions, the South African Communist Party and factions within the ruling African National Congress remains strong.
- While several ministers appear to be Ramaphosa’s recommendations, others inspire little confidence of policy reform or effective implementation.
- South Africa needs decisive action from pro-business policies introduced immediately and patience will wear thin for the government if it is unable to achieve this.
- Appointment of this cabinet alone hasn’t removed enough of the political uncertainty to stimulate strong growth.
Casparus Treurnicht, money manager at Gryphon Asset Management
- A pro-Zuma legacy remains.
- One good thing is that there seem to be performance measures that will be implemented and monitored. “Let’s see how it goes. They all mean nothing unless you act upon them.”
Ronak Gopaldas, director of Signal Risk, an Africa focused risk management firm
- “Investors will take some comfort from the fact that there was continuity and technocratic competence retained in key economic positions, but ultimately the lack of ideological coherence within the African National Congress means that this is a compromise cabinet which will invariably lead to compromised outcomes. This makes it difficult to make the bold, decisive and rapid changes required to catalyze growth in the SA economy."
- “Maintaining the clean-up squad, getting rid of obvious bad apples and trimming the size of the administration was what investors deemed satisfactory to clear the low hurdle rate the market had set.”
Business Unity South Africa
- Lobby group said it welcomed the continuity in the core economic ministries, particularly in Mboweni’s finance portfolio.
- State-owned enterprises remain the greatest risk to public finances, with Eskom being the biggest concern. The resolution of the issues facing SOEs is crucial, as the crafting of industrial and trade policies.
- The country is at an economic cross-roads and is faced with an unemployment and inequality crisis, which has been characterized as a key threat to democratic stability.
Banking Association of South Africa
- Industry lobby group said performance agreements for ministers should be made public so that all South Africans are able to hold them to account.
- Mboweni’s reappointment is an important signal to the market of a commitment to responsible economic and fiscal policies. “We hope Minister Mboweni will give rebuilding capacity in the National Treasury and restoring confidence in public finances his serious attention.”
- Gordhan is again charged with dealing with the single greatest threat to the South African economy -- the financial and operational crisis at Eskom. There is no time left for patience and studying and understanding the problems at the utility, when much of this work has already been done, and every day increases the company’s debt burden and operational inefficiencies.
To contact the reporters on this story: Adelaide Changole in Nairobi at achangole2@bloomberg.net;Colleen Goko in Johannesburg at cgoko2@bloomberg.net
To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Robert Brand
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