Financial markets appear to have factored-in the likelihood of Finance Minister Enoch Godongwana retaining his position. This comes as South Africa awaits an announcement on the new Cabinet under the Government of National Unity (GNU).
But it’s also possible that Godongwana may not be returning to his old portfolio.
Econometrix Chief Economist Dr Azar Jammine says investors are more inclined to the return of Godongwana at National Treasury.
He says this is evident in how the rand has rallied in recent days, following the re-election of President Cyril Ramaphosa.
Jammine says the markets are seen to be comfortable with Godongwana, despite some criticisms. But he believes Godongwana is receiving favour for navigating the local economy through some tough economic challenges including the COVID-19 pandemic and lower government revenues.
“I don’t think there’ll be all that much controversy if he is reappointed as Minister of Finance. He has been seen to be at the forefront of the pursuit of fiscal austerity in the country, which has gone down relatively well with the markets. The markets are quite satisfied that he is a person who has a lot of gravitas within the ANC itself. And yet at the same time has not abandoned the principles of fiscal discipline in favour of pandering to the desires of the partners of the alliance, COSATU and the SACP, at will.”
Market analyst Simphiwe Letlojane says the rand has since given up some of its earlier gains.
He says this is because investors are in a “wait-and-see” mode as the wait for the announcement of Cabinet appointments continues.
“Seeing you’re trading slightly weaker compared to what we saw yesterday but it was quite a bit of an appreciation that we have seen. So, potentially a little bit of profit-taking by some traders, especially if you’re looking at the option as well. In terms of the financial sector, so that also slightly in the rate today after some of the strong values that we had seen earlier in the week.”
Economists say they believe that parties such as the Democratic Alliance (DA) and the Inkatha Freedom Party (IFP) would not be averse to seeing Godongwana continuing to oversee the national purse.
However, the DA would most likely challenge a position for the Department of Trade, Industry and Competition.
There are also concerns about the impact of the DA and the ANC’s differences in areas such as the labour market, minimum wage legislation and the Black Economic Empowerment framework.
