JSE, rand hit by cabinet reshuffle

The latest changes add to investor uncertainty

THE RAND and the JSE weakened sharply following President Jacob Zuma’s latest cabinet reshuffle – the second in less than seven months – with financial stocks battered by the news. The rand had dropped more than a percent to R13.4543 against the dollar by 5pm yesterday from a day’s high of R13.27. The JSE all-share index, which breached the 58 000 mark for the first time on Monday, surrendered its gains, shedding 280 points to 57 833.

The benchmark top 40 index also traded 0.39 percent weaker at 51 510 points, with financials shedding 317 points to 42 658 points.

Investec analysts said in a note that while the market focus was likely to rest with an awaited update on US industrial production and manufacturing stats, the local front remained dominated by politics, factionalism, corruption, nepotism and court battles.

Investec said: “This will be the theme in the run-up to the ANC’s December elective conference and may well extend beyond that with the culture of the organisation unlikely to change just because of a new leadership.

“Nonetheless, while South Africa’s economy continues to under-perform, it lends itself to a more balanced foreign exchange flow environment with some support for the rand.”

The announcement of the cabinet reshuffle raised speculation that the nuclear deal could now be fast-tracked with new Energy Minister David Mahlobo at the helm and Mmamoloko Kubayi moved to Communications.

Economist Lumkile Mondi said Mahlobo, considered a Jacob Zuma confidant and loyalist, would ensure the deal was implemented.

“He will do whatever the shadow state wants him to do. He is there to ensure that, in light of the uncertainty regarding the National Prosecuting Authority, the good times continue to roll.”

Raymond Parsons, a professor at the North West University School of Economics, said the frequency of the reshuffles comes at a high cost to the economy.

Parsons said the extent to which constant changes at the top of government and the public sector were made contributed to policy uncertainty. “If it is true that new Energy Minister Mahlobo has been selected to expedite the controversial nuclear deal, it clashes with the definitive statement made by Finance Minister (Malusi) Gigaba at the International Monetary Fund meeting last week that South Africa could simply not afford the nuclear project at present,” Parsons said.

Barclays Africa’s share price fell 1.80 percent to R145.68, FirstRand eased 1.48 percent to R52.52 and Standard Bank weakened 1.46 percent to R169. Sanlam shed 1.01 percent to R71.58, with Old Mutual down 0.62 percent at R35.28.

NKC African Economics analyst Gary van Staden said the reshuffle was unlikely to improve investor perceptions and would only reinforce the prevailing view of policy uncertainty.

“The signal externally will be that investors can expect no significant improvement from this new cabinet,” Van Staden added.

The business committee also voiced its dismay at a second cabinet reshuffle this year.

Business Unity South Africa (Busa) said it was concerned about the changes.

Chief executive Tanya Cohen said Busa was anxious about South Africa’s fiscal and macro-economic position which required greater certainty on the direction and credibility of government policy.

Cohen said the changes could have an impact on the forthcoming Medium-Term Budget Policy Statement.

“Stability and certainty are a prerequisite for business confidence translating directly into the country’s economic growth potential. Political and economic stability is required to ignite inclusive economic growth and generate much-needed employment and revenue to pursue our social goals.

“This latest reshuffle further undermines prospects for South Africa’s growth,” Cohen stressed. – Additional reporting by Siseko Njobeni.