What to expect for South Africa after Ramaphosa chooses his new cabinet

With the elections over and squarely in the bag for the ANC, we now move rapidly towards the first sitting of parliament, the re-election of Cyril Ramaphosa as president, and the appointment of new ministers and deputies to implement standing policies.

Following the submission of the list of MPs to Chief Justice Mogoeng Mogoeng this week, South Africa’s parliamentarians are set to be sworn in on 22 May 2019.

The next day (23 May) MPs will elect a new president for the country, who will be inaugurated on the following Saturday (25 May).

The president will announce his new cabinet on 26 or 27 May, and the new ministers will be sworn on the 28th.

All these processes are fairly predictable and set in stone, but what happens afterwards is something that many analysts, economists and investors will be keeping a keen eye on.

Ramaphosa’s mandate

One of the central questions floating around the 2019 elections was how much support president Cyril Ramaphosa would need to cement his so-called “mandate” to reform and clean up government, which has suffered a decade of wasteful spending and abuse.

Most analysts said the ANC would need to secure a 60% base for Ramaphosa to hold enough sway within the party to push forward with his plans. However, an Intellidex poll of over 45 investors and market players cast doubt on whether such a level even exists.

For many, the baseline scenario is that the internal politics of the ANC is such that any move to reform would be hampered by interests that rely on government extraction (the networks of patronage and tenderpreneurship that underpinned the Zuma administration), and serve as a roadblock to any real change.

This brings into question where South Africa is headed on a number of key policy issues over the next few years.

What happens next?

As a baseline, the market views that a mandate for Ramaphosa, if it exists, would be at between 57% and 60%, which is where the party sits after the elections.

That would mean that president Ramaphosa, in theory, could push ahead with current plans for the country.

Taking analysis from sources like Intellidex, Goldman Sachs, and various economists and analysts, this is the general feeling on where Ramaphosa sits on several key issues:


Cabinet

Speaking at an investor conference this week, Ramaphosa made it clear that his new cabinet will be made up of competent individuals who will focus on growing South Africa’s economy.

It is widely expected that the cabinet will be reduced from 35 departments to around 25 (or even fewer) – though action will speak louder than words when it comes to implementing actual changes.

Considering the party’s controversial list of MPs, the president may be hamstrung, internally, into putting familiar faces into positions of power.


Eskom

Crisis-hit Eskom is currently the biggest risk to the South African economy, and much of the country’s economic future hinges on government’s handling of its problems.

Ramaphosa has announced a plan to split to utility into three different entities – but is facing pressure from unions to keep the group’s bloated workforce on the books, and private companies out.

While analysts expect some positive movement, it is not a short-term project, and with tensions between stakeholders, the process brings uncertainty which will not be resolved any time soon.


Land Reform

As part of his address to investors, Ramaphosa tried to allay fears that government would be expropriating private land, saying that the focus was on state-owned land.

Like Eskom, the process around land reform has no quick solution, and mixed messages and wording from the government on what exactly will happen brings uncertainty.

According to Intellidex analyst Peter Attard Montalto, in the short-term, the process will face many challenges and entrench uncertainty, keeping any possible positives strictly in the long-term outlook.


Nationalisation of the Reserve Bank

Despite push-back from the private sector and the Reserve Bank itself, Ramaphosa has been clear that the new ANC government will push ahead with nationalising the Reserve Bank.

The moves will be challenged in court, which will drag out the process, and it may not be resolved any time soon, leading to uncertainty in the market, analysts say.

Government has argued that South Africa is an outlier in having its central bank in private hands and that nationalising it would not impact the bank’s mandate.


Visas

President Ramaphosa has told investors that South Africa will resolve its visa challenges to make it easier for people to visit the country, boosting the tourism industry and bring needed skills to local businesses.

The country is already working to implement an e-visa portal for travellers and has already walked back on the damaging policies introduced by former home affairs minister Malusi Gigaba which cost the local tourism industry billions of rands.

However, analysts have noted that the country’s key skills lists is still restrictive, and changes to actual immigration laws are unlikely to change.


Other key policies

In a new research report, Intellidex highlighted other key policies to look out for with the new government:

  • Spectrum: This battle has been fought for many years – but with pressure from the market, consumers and authorities, spectrum auctions may finally take place.
  • Healthcare: Government’s NHI has already been confirmed to be coming, and it’s likely too late to stop it. Another slow process, which is likely to face many court challenges.
  • Education: Spending in the sector is already the highest among all other departments, and there is unlikely to be any significant moves in the area.

Read: We are not going to take your land: Ramaphosa to investors

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What to expect for South Africa after Ramaphosa chooses his new cabinet