With South Africa\u2019s election out of the way, the next key moment for investors will be the appointment of President Cyril Ramaphosa\u2019s cabinet.<\/p>\n
Ramaphosa will be inaugurated on 25 May and is expected to announce his new executive by 27 May.<\/p>\n
He faces the challenge of establishing a more streamlined administration free of ministers tainted by graft and able to implement tough economic reforms. A misstep on key appointments could fell the rand, which has outpaced the emerging-market average appreciation since the 8 May election.<\/p>\n
South Africa\u2019s currency has gained 1.6% to R14.20 per dollar since the poll, and may extend its advance to R13.20 per dollar by year-end<\/strong> provided the new cabinet inspires confidence among investors, according to Morgan Stanley.<\/p>\n The options market is giving a one-in-two chance of reaching that level, according to Bloomberg\u2019s probability calculator.<\/p>\n “We are keen to see whether some ministries could be consolidated to give a lower overall number of cabinet posts,” Morgan Stanley strategists including Hans Redeker, James Lord and Sheena Shah wrote in a note to clients.<\/p>\n “This would be positive for streamlining policy and an indication of Ramaphosa\u2019s growing authority within the ANC.”<\/p>\n Investors want clarity on the positions of Finance Minister Tito Mboweni and Public Enterprises Minister Pravin Gordhan, or potential replacements should either of them stepo down, the strategists said.<\/p>\n A poll conducted by Citigoup on 14 May found that less than 50% of respondents expected Ramaphosa to appoint reform-minded ministers, but most believed he would cut its size.<\/p>\n In this scenario, assets would not rally<\/strong>. Only 20% or so expected him to both downsize the cabinet and appoint loyal and untainted ministers to key portfolios. This would unlock the potential for South African assets to rally, according to Citigroup.<\/p>\n An internal report by the ANC in February recommended that Ramaphosa slash his cabinet by close to half.<\/p>\n The move would reduce the executive inherited from Jacob Zuma to 40 from 72, with 25 ministers and 15 deputy ministers.<\/p>\n The presidency said the reconfiguration plan would be announced before any cabinet appointments.<\/p>\n
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