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Who Ramaphosa picks for cabinet will determine rand’s direction

Ramaphosa will be inaugurated on May 25 and is expected to announce his new executive by May 27.

With South Africa’s election out of the way, the next key moment for investors will be the appointment of President Cyril Ramaphosa’s cabinet.

Ramaphosa will be inaugurated on May 25 and is expected to announce his new executive by May 27. 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 May 8 election.

South Africa’s currency has gained 2.1% to 14.13 per dollar since the poll, and may extend its advance to 13.20 per dollar by year-end provided the new cabinet inspires confidence among investors, according to Morgan Stanley. The options market is giving a one-in-two chance of reaching that level, according to Bloomberg’s probability calculator.

“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. “This would be positive for streamlining policy and an indication of Ramaphosa’s growing authority within the ANC.”

Investors want clarity on the positions of finance minister Tito Mboweni and public enterprises minister Pravin Gordhan, or potential replacements should either of them step down, the strategists said.

Mboweni is on the ANC’s list of elected lawmakers, increasing the chance he will remain in his post.

A poll conducted by Citigoup on May 14 found that less than 50% of respondents expected Ramaphosa to appoint reform-minded ministers, but most believed he would cut its size. In this scenario, assets would not rally. 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.

An internal report by the ANC in February recommended that Ramaphosa slash his cabinet by close to half. The move would reduce the executive inherited from Jacob Zuma to 40 from 72, with 25 ministers and 15 deputy ministers. The presidency said the reconfiguration plan would be announced before any cabinet appointments.

© 2019 Bloomberg L.P

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Two of the major destroyers of SA’s economy, Davies and Patel, are gone.

Unfortunately David Masondo, the man touted to take over the economics cluster does not inspire confidence. He will nationalism your kidneys for the greater good.

We’ve also seen the last of Michael Masutha, a man so dense he does not even know he is staying in Gavin Watson’s house. Almost anyone will be an improvement

It is likely that either Gordhan or Mboweni or both will throw in the towel.

The Rand is only heading one way. International investors are not as dumb as the vast majority of South Africa’s populace.

Squirrel either needs to grow a spine and develop some morals in a very short amount of time, or continue down his current path of lies, deception and cowardice. I believe the latter is what is inevitable.

“Ramaphosa will be inaugurated on May 25 and is expected to announce his new executive by May 27.”

It is HOPED he will announce. Even a week is a long time in politics and we may see a left-field explosion and get someone like Nkosazana Dlamini-Zuma being voted in.

Watch this space …

I understand that the date if “Africa Day”. Looking at the state of Afrika, that is a bad omen for SA IMHO of course.

40 good apples in a truck full of rotten apples still leaves you with a truckload of rotten apples.

CR + cabinet have more than a mountain to climb.

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