JOHANNESBURG – South Africa will benefit from a wave of positive market sentiment under new President Cyril Ramaphosa, Finance Minister Malusi Gigaba said on Friday, as speculation swirled about whether he would keep his job.
Ramaphosa was sworn in as head of state on Thursday after his scandal-plagued predecessor, Jacob Zuma, reluctantly resigned on orders of the ruling African National Congress (ANC) after nine years in office blighted by corruption, economic mismanagement and disputed appointments.
Ramaphosa is expected to reshuffle his cabinet and Gigaba, seen as loyal to Zuma, is among ministers likely to be affected. Ahead of Ramaphosa’s maiden state of the nation address on Friday, Gigaba said South Africa should keep riding the wave of positive market sentiment after the change of leadership.
He said that over the medium term, Africa’s most industrialised economy would be working “very hard” to restore its investment grade after last year’s downgrades to “junk” status by S&P Global Ratings and Fitch.
Moody‘s, which rates South African debt on its lowest investment grade rung, placed the country on review for a downgrade.
“It’s not going to be easy to restore our investment credit rating but we are going to continue doing our best to maintain, at least from the point of view of Moody‘s, an investment grade and to ensure that the other ratings agencies do not revise us downwards,” Gigaba told Reuters outside parliament in Cape Town.
“We need to sustain the level at which we are for now, but over the medium term, we are going to work very hard to restore our investment grade.”
Moody’s is expected to make a decision after the Treasury presents its 2018 budget to parliament on Wednesday.
Market focus was on whether Ramaphosa would reshuffle the cabinet before budget day and replace Gigaba.
Ramaphosa was due to give more details about how he plans to tackle graft and revitalise economic growth on Friday in his first state of the nation address.
“Ramaphosa should quickly announce a cabinet shuffle that jettisons all remnants of the Zuma years,” BBH analysts wrote in a note adding, “The most important one that should be replaced is Finance Minister Gigaba.”
Asked if he would remain in his post under Ramaphosa, Gigaba said he served at the pleasure of the president who had the prerogative to both “appoint and disappoint” ministers.
Some economists and political analysts questioned the credentials of Gigaba when he was named to head Treasury in March last year, replacing Pravin Gordhan who had built a strong reputation for fiscal prudence.
Gigaba’s unexpected appointment made him the fourth minister to lead the Treasury in just under two years as South Africa grappled with low growth and high unemployment. Though he lacked an economics background, he was no policymaking novice, having been public enterprises minister under Zuma from 2009-2014.
He also served as home affairs minister before moving to the finance ministry.
In October, Gigaba announced dire budget forecasts that included weak growth expectations, revenue shortfall and rising government debt, shocking financial markets.
The dismal economic outlook led to the downgrade of South African debt to “junk”.
“Expect huge scrutiny of the new cabinet, likely to be appointed over the weekend, as President Ramaphosa treads the line between party unity and his promise to fight corruption,” Rand Merchant Bank analyst John Cairns said.
“Speculation is rife over who will read the budget on Wednesday, although we will be more focused on the content than the persona.”
Analysts said other ministers who could be removed in a cabinet reshuffle include Mines Minister Mosebenzi Zwane amid policy uncertainty in the key mining industry. It has been waging a court battle with the minister over an increase in black ownership targets.
Ramaphosa has promised to end an impasse over the Mining Charter, introduced as part of a wider drive designed to rectify the lingering disparities of apartheid.
“Zuma’s exit may be followed by a cabinet reshuffle, greater efforts for fiscal consolidation and further governance changes at state-owned enterprises,” UBS analysts said.
“This should lower the probability of a rating downgrade by Moody’s in March, although the risks remain considerable.”
($1 = 11.6282 rand)