Johannesburg - As the SA election result draws nearer, investors' thoughts are turning towards the issue of the appointment of the new cabinet in South Africa, according to a senior emerging markets economist.
"We are looking for evidence that Jacob Zuma is appointing people on merit rather than patronage, and equally what happens with the appointment of the deputy finance minister and if someone will be put there to be groomed to take over from Manuel in a year or so," says Peter Montalto from Japanese bank
Nomura.
This comes as the ANC looks set to get somewhere around the key two-thirds level.
"However, while voting was skewed away from the ANC earlier on, we now believe that it has gone the other way with a large number of votes coming in from ANC strongholds most recently. It is going to be a very close-run thing and it is not a done deal that they will get over two-thirds," he notes.
Montalto says that markets are not reacting to the news, with people unwilling to trade the results.
However, he puts the move in markets more down to central bank chief economist Monde Mnyande's comments on Thursday evening.
Mnyande said at a Wits Business School lecture that he does not see a change in overall macroeconomic policy in South Africa under the new government.
He also said the current "troubled times" should be viewed as a "passing phase".
Although South Africa's leading economic indicator has increased somewhat, the trend still points to a continued slowdown in aggregate economic activity this year. But Mnyande added that the economy would move to a long-term positive growth curve in the near term.
"Investors are jittery about the two-third level but we believe it is mainly psychological. In reality it does not make much difference to economy or market related policy at all. Investors' concerns are more resulting from the recent noise about the Zuma charges and associated issues of corruption," says Montalto.
He says one of the key issues is going to be how the ANC treats the DA in the Western Cape.
"There is a bill under consideration which could claw back power from local government to the centre. Investors are looking at what this could mean. Though the ANC says it is only to wrest power from authorities that are not delivering, we remain cautiously sceptical on this issue and wait and see."
"As we have said before: we buy the ANC's line that there will not be any dramatic change in policy, however we are still cautious over the effect policy will have on the productive areas of the economy," concludes Montalto.
- I-Net Bridge