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Zuma faces first big test of new government

2014-05-21 05:00
Johannesburg - Bruised but victorious, Jacob Zuma will be sworn in for a second term as president this week. Who he chooses as his lieutenants will help decide if the next five years are as rocky as the last.

After the ANC-dominated parliament has formally elected him as president on Wednesday and he is sworn in on Saturday, Zuma faces the first big decision of his second term: Who will be in the cabinet.

In the past, the build-up to the choice of top-line ministers has been overhyped before the actual appointments dashed expectations of change.

Zuma has tended to distribute the government's 30-plus ministerial posts among the ANC's rival factions, meaning reshuffles have a little something for everyone.

But with the country's economic problems mounting and investors parking their money on the sidelines waiting for reform, Zuma's choices this time round could have far-reaching consequences.

"The disappointing domestic growth prospects will be a major challenge for the government this year," said RMB economist Mamello Matikinca. "The need to address labour issues has become more pressing."

The moneymen will welcome unionist-turned-businessman Cyril Ramaphosa's appointment as deputy president, but will be looking to see who gets top economy-related portfolios as an indicator of whether the much-vaunted and little-implemented National Development Plan (NDP) will finally become more than words.

The plan, first floated in 2011, envisages a swathe of major infrastructure projects, labour reforms to curb unemployment and rejects the nationalisation of key sectors such as mining.

It has been moribund thanks to opposition from within the ANC and with the party's allies in the South African Communist Party and in the trade union movement, which say it is too liberal.

Who Zuma choses and why will be seized upon as an indication "that the centre of gravity may be shifting" within the ruling party, according to Nomura economist Peter Attard Montalto.

"Investors and rating agencies will likely watch for how the inherent contradictions within the ANC on microeconomic policy play out or if the party continues to dig yet deeper into these differences within the party."

With the NDP's primary champion Trevor Manuel leaving his job as minister in the presidency investors are anxious to see who replaces him.

Will Gordhan stay?

Crucially, they also want to know if Pravin Gordhan is retained as finance minister.

Gordhan, a 65-year-old former tax official, is seen by many in the business community as a steady hand on board a vessel that pitches, rolls and yaws, yet somehow never seems to move very far.

Ahead of the elections Gordhan's last budget address sounded very much like a swan song, and there were murmurs that he may be replaced by former central bank governor Tito Mboweni, to mixed response.

Trade partners and some home-grown businesses would love to see the axe fall on both economic development minister Ebrahim Patel and trade and industry minister Rob Davies, who are seen as favouring state-led management of the economy.

If the team remains largely unchanged, the credit rating agencies, who already downgraded South Africa once during Zuma's first term, will want reforms, and quickly.

"Without stronger growth, faster job creation and a narrowing of the fiscal and current account deficits... South Africa's creditworthiness will gradually deteriorate," Fitch warned ahead of its mid-June review.

Any further credit downgrade would see South African bonds cut to "junk" status, making them off-limits for some of the world's largest institutional investors, such as pension plans.

With fewer willing lenders the country could face higher borrowing costs, pushing its deficit ever wider and spelling more problems for Zuma and an economy that recently lost its crown as Africa's largest.

The ANC won a landslide earlier this month, but with a smaller margin than past elections following a first five-year term in office plagued by corruption, mismanagement and often deadly social unrest.

Read more on: sacp  |  anc  |  jacob zuma  |  elections 2014  |  politics

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