Sat, 18 Jan 2020

South African equity investors got the election result they wanted, more or less. Now they're hoping President Cyril Ramaphosa will follow by choosing a team of competent ministers that's lean and free of the taint of scandal.

Ramaphosa is expected to announce his Cabinet within the next few days and the early signs have encouraged investors: former Environment Minister Nomvula Mokonyane, accused of taking bribes, has already been ruled out. The position of Deputy President David Mabuza, who has been linked to a series of scandals, is also in doubt while he faces scrutiny from the ruling party's integrity commission. Mokonyane and Mabuza deny any wrongdoing.

A line-up that signals a push for clean government and a focus on the economy will boost the mood among traders, said Nolwandle Mthombeni, an analyst at Mergence Investment Managers in Cape Town.

"A good outcome in the cabinet appointments will bring about the sentiment needed," Mthombeni said. "South African corporates in particular need some level of assurance before they can have the confidence to start investing in the country again."

Ramaphosa has vowed to clean up the government after his predecessor Jacob Zuma's scandal-marred nine-year rule. He needs a team of ministers to help him kick-start an economy that has expanded by an average of just 1.1% in the past five years.

Here are more comments from investors about the Cabinet:

Ferial Haffajee: Ramaphosa set to merge two economic ministries

Positive picks would be Finance Minister Tito Mboweni, Naledi Pandor, minister of higher education and training, Paul Mashatile, treasurer to the ANC, and Public Enterprises Minister Pravin Gordhan. If speculation that Thuli Madonsela, the respected former anti-graft ombudsman, could be appointed a minister proves correct, that would be positive for the market.

Appointing ministers seen as not tainted by scandal, or as Zuma apologists, will be key. Developments around Mabuza and Mokonyane will be seen as a positive. Mabuza has been mired in alleged dirty dealings for some time now. Mokonyane's tenure at water affairs was a disaster.

Retaining people in key positions such as Mboweni, and Gordhan staying on in some capacity are all markers for investors that reform is a priority. Some Zuma apologists and those mired in some scandal will likely be reappointed, but it hinges on what posts they occupy and influence they may have. This will dictate the market reaction.

The market is suffering from politician fatigue, and merely making appointments is not going to change investors' minds. What investors would like to see is people going to jail for corruption and actions over words.

The best thing that could happen now is sorting the debt burden at the state power utility [Eskom]. Deregulation is also high on the list. It's become impossible for small businesses to establish themselves and survive.

A good Cabinet would include ministers in key portfolios such as mining and energy resources, finance and public service and administration being suitably qualified and not implicated in any unlawful acts and impropriety.

The presence of individuals negatively implicated in the state capture inquiry or with a poor track record in previous cabinet roles would be a negative sign.

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