What investors really think about Zuma’s new cabinet
It has been a month since president Jacob Zuma sent former finance minister Pravin Gordhan packing – and investors remain unsettled and apprehensive, even as the newly elected cabinet appears to be bringing a ‘taste’ of stability.
Research analyst at Nomura, Peter Attard Montalto was at the World Economic Forum on Africa this past week, where he gauged investors, politicians and business leaders on their current feeling about South Africa.
The overall mood is fairly pessimistic, Attard Montalto said – which is a stark contrast to the outlook for much of the rest of the African continent, where
business and government is seen being able to form successful partnerships.
“The pessimism on South Africa…relations between business and government are
viewed as increasingly fractious with politics dominating,” the analyst said.
While remaining bearish on South Africa’s growth fundamentals, it was noted that an under-appreciated result of the recent cabinet reshuffle was that it was aimed to, ironically, create a greater sense of risk management and ‘steadying the boat’.
“While some loyalists have been retained despite issues in their departments (social security especially), there is a greater balance of ministers that are trying to steady the ship into the December elective conference in key areas,” Attard Montalto said.
“While the reshuffle led to downgrades and removal of the Minister of Finance, who was trying to keep sentiment on the economy stable, the lens to view it through instead is where the cabinet can now lay low and get on with its day job, not create too much noise through unnecessary court cases and follow the rule of law where necessary to push forward key policies like nuclear,” he said.
A few examples of this were:
- New Energy Minister Mmamoloko Kubayi’s pro-nuclear view and yet sympathy towards public consultation is designed to push forward nuclear policy (again) as fast as possible, maybe without even appealing the recent Western Cape High Court judgement so as not to waste time.
- New Finance Minister Malusi Gigaba is pushing back against ‘blatantly’ (publically) illegal actions by SOE Denel (in the VR Laser case that involves the Guptas).
- New Police Minister Fikile Mbalula is not appealing against the removal of Hawks head Berning Ntlemeza – as there would be little point when a new head that can basically do the same thing is appointed instead.
- New Communications Minister Ayanda Dlodlo has dropped her predecessor’s confusing push back against encrypted set-top boxes (which is ANC policy).
With these pieces now in play, Zuma’s government can now do away with the distractions of the ministers before, and rather focus on the elective conference at the end of the year.
“Put simply, attention is being refocused on December, rather than getting ‘lost’ in the
mess of court cases and accompanying media attention,” the analyst said.
What investors think of the contenders for the ANC’s presidency
According to Attard Montalto, WEF attendees he spoke to were all over the place on the main contenders to be the next ANC president – namely Cyril Ramaphosa and Nkosazana Dlamini-Zuma.
These views ranged from Dlamini-Zuma being ‘the next president Mbeki’ (ie investor friendly), to her being anti-investor and a radical leftist.
A similar range was expressed regarding Cyril Ramaphosa.
The analyst noted that Nomura’s baseline remains that there is a 60% change that Dlamini-Zuma will win (ie she is the front-runner), but acknowledged Ramaphosa’s more divisive stances over the past few weeks.
Ultimately, however, Ramaphosa has been successfully dragged into a more radical view on land, with his weekend comments placing him squarely in the “transformation now” camp – an echo of the narrative Zuma is painting.
“After the policy conference (30 June to 5 July), should allow for a more meaningful delineation of the probabilities of various outcomes and of slate composition,” Attard Montalto said.
“We think what was more obvious than previously is that both candidates are being treated with a much greater degree of scepticism and there is less optimism that the removal of President Zuma is a simple positive,” Attard Montalto said.
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