Ramaphosa’s first cabinet, which he announced late in the evening of Wednesday May 29, was clearly a compromise as he had to accommodate various factions in the ANC and other interest groups. “The result was not ideal,” said Townsend, “but it was better than what came before, and there were definitely some rays of hope.”
Like many other experts and analysts watching for signs of change under the new leadership, Townsend was not sure what to expect from Thursday’s Sona speech in Parliament. She said she hoped there would be more concrete signs that Ramaphosa was putting the building blocks in place to really kickstart inclusive economic growth.
The president is under enormous pressure with the economy having contracted by more than 3% recently, tax revenues falling and youth unemployment, at epidemic levels, fast becoming the biggest threat to social stability.
Changes to the Cabinet, including its reduction by eight seats to a total of 28 positions, suggested that Ramaphosa intended to embark on a process economic reform. The combination of the labour and employment portfolios in the Cabinet looked like “a very clever move given how a lot of economic reform to create employment may be viewed as anti-labour,” said Townsend.
Keeping Finance Minister Tito Mboweni and Minister of Public Enterprises Pravin Gordhan in their posts has given the markets hope that Ramaphosa is dedicated to stability and economic growth. Keeping these heavyweights in their posts in the face of populist pressure to remove them showed also that Ramaphosa was prepared to make hard choices.
“Some tough choices have to be made about Eskom and SAA,” said Townsend, “I don’t think the president can afford to keep bailing out these two disastrous State-Owned Enterprises. He also needs to provide clarity about his plan and start executing it.”
From the start of his tenure as president, Ramaphosa has made international investment a focus of his growth plans, and the market will be hoping Sona will include more detail on how he plans to make this a reality.
Again here Townsend pointed to the composition of the Cabinet for hopeful signs. In this case, she said, the expansion of Ebrahim Patel’s Economic Development portfolio to include Trade and Industry was another move that would engender confidence in South Africa among the international investing community. Patel was instrumental in the president’s investment summit earlier this year and his continued presence for further rounds will be reassuring after so much change and disruption over the last few years.
“More importantly,” added Townsend, “it means that Treasury will be solely responsible for economic policy development. This ensures that there is not two different lines of thought in terms of economic policy.”
Mica Townsend, Business Development Manager at 10X Investments, is a CFA Charterholder