What to expect in South Africa heading to the end of 2020 – including a possible cabinet reshuffle: analysts

While support for President Ramaphosa appears to be at recent-highs, the real test is likely in the next three months as focus shifts to risks of localised lockdowns, wage negotiations, cost-cutting measures and narrowing room for stimulus.

This is the view of analysts at Bank of America (BofA) which held a recent conference with local and foreign investors about the challenges currently facing the country.

The group forecast a 10.3% recession this year for South Africa, with a main fiscal deficit of 14%. It also expects debt to remain on an upward trajectory, even with some cost-cutting measures factored in.

It added that growth and inflation are likely to remain on the downside to justify room for more monetary easing, but it noted that pace could slow as the South African Reserve Bank (SARB) assesses risks.

Support for Ramaphosa

One of the key focuses of the call was the country’s political backdrop and how easy it will be for government to introduce much-needed reforms.

“Latest polls suggest approval ratings for President Ramaphosa have increased towards 80%, with strong backing after initial lockdown measures were announced at end-March,” BofA said.

“This has waned slightly since Q2, as stricter enforcement of Covid-19 measures weighed on sentiment. Support among the African National Congress (ANC) executive is now likely over 60% from 50% margins after 2017 elective conference,” it said.

The group noted that push-back against the bailout of South African Airways (SAA) signals scope for downsizing of other state-owned enterprises (SOEs), but Eskom discussions still remain complex and will likely be deferred into 2021.

BofA said that unions are also likely to be politically weaker amid rising unemployment and lower cohesion.

“This suggests scope for cabinet changes in one to two months, as President Ramaphosa attempts to further strengthen his support base.

“This is, however, likely to be a balancing act with high political costs in removing core ANC members. We, therefore, do not anticipate an acceleration in reforms in the event of a limited reshuffle,” BofA said.


Despite support for Ramaphosa, BofA said that competing policy priorities continue to weigh on reform momentum.

The group said that will likely lead to ‘messy compromises’ on issues such as reducing headcounts, the role of SOEs and land expropriation.

“Current discourse on infrastructure funds suggests more private sector buy-in to stimulate growth,” it said.  However, it noted that policy uncertainty and corruption are likely to remain key bottlenecks for the country.

It added that land expropriation will be the main risk to instability and investor sentiment in 2021.

Read: South Africa’s big banks looking at additional debt relief options for homeowners

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What to expect in South Africa heading to the end of 2020 – including a possible cabinet reshuffle: analysts