Zuma’s Cabinet Falls Short as South Africa Strike Hurts EconomyMike Cohen and Amogelang Mbatha
South African President Jacob Zuma appointed a cabinet that economists and political analysts said fell short in inspiring confidence in an economy battered by labor unrest and slowing economic growth.
Zuma, 72, replaced Finance Minister Pravin Gordhan, 65, after a single term with his deputy, Nhlanhla Nene. He also appointed new energy and mining ministers with no experience in those industries in an expanded cabinet that took office yesterday.
Zuma began his final term with the ruling African National Congress having won elections by the lowest margin since it came to power two decades ago and the economy struggling amid a four-month strike by platinum miners. The rand snapped three days of gains yesterday, falling 0.6 percent to 10.3608 against the dollar as of 5:25 p.m. in Johannesburg, the worst performer of 25 emerging-market currencies tracked by Bloomberg.
“The cabinet appointments suggest that political logic prevailed over economic reform priorities and a good governance agenda,” Anne Fruhauf, southern Africa analyst at New York-based risk adviser Teneo Intelligence, said in an e-mailed note to clients. “Gordhan’s removal may raise concerns over the Treasury’s ability to stick to its course of fiscal consolidation and its clampdown on corruption.”
Ngoako Ramatlhodi, a former deputy prisons minister, replaced Susan Shabangu as mines minister. Tina Joemat-Pettersson, who was implicated by the nation’s corruption ombudsman in alleged irregularities in the awarding of government tenders as agriculture minister, will head up the energy ministry. She has denied wrongdoing.
Zuma’s administration is focusing economic policy on the 20-year National Development Plan that seeks to cut the jobless rate to 14 percent by 2020 from 25 percent and boost the growth rate to at least 5.4 percent.
Government data today may show the economy contracted for the first time since 2009 by an annualized 0.2 percent in the first quarter, according to the median estimate of 22 economists surveyed by Bloomberg.
Zuma’s appointment of Cyril Ramaphosa, 61, as his deputy may help to shore up confidence. Ramaphosa is one of the nation’s wealthiest black businessmen and helped draft the National Development Plan.
“A résumé of trade union activism and then successful private sector activities has pinned much market hope that Ramaphosa will repair relations between corporates, government and, especially, trade unions,” Gina Schoeman, an economist at Citigroup Inc. in Johannesburg, said in an e-mailed note to clients. “His appointment is an obvious market positive.”
Gordhan was widely expected to retain his post. During his term, he steered the economy through the first recession in 17 years, while fending off pressure from labor unions to increase spending in the face of a widening budget deficit.
“Investors would generally have preferred continuity in the form of Pravin Gordhan staying on as finance minister,” Dennis Dykes, chief economist at Nedbank Group Ltd. in Johannesburg, said by phone. Rather than the government expanding its role through a bigger cabinet, “investors would like to see more private sector participation in the economy,” he said.
Nene, 55, had been deputy finance minister since 2008. He served on the committee that helped organize the 2010 soccer World Cup in South Africa and was chairman of the Public Investment Corp., which invests civil servants’ pension funds. Like Gordhan, he has stressed the need for the government to keep borrowing and inflation in check and bolster investment and economic growth.