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Ratings agencies will see reshuffle as positive move - analyst

Feb 27 2018 08:33
Carin Smith and Moeshfieka Botha

Cape Town - Ratings agencies will likely see Monday's late night Cabinet reshuffle as a positive move, according to Tinyiko Ngwenya, an economist at Old Mutual Investment Group.

President Cyril Ramaphosa at 22:00 on Monday announced changes in the portfolios of 21 Cabinet posts. Among the new ministers set to be sworn in on Tuesday are Nhlanhla Nene as finance minister and Pravin Gordhan as minister of public enterprises

"This was quite an impressive list," said Ngwenya. 

"The ratings agencies will see this Cabinet reshuffle as a very positive move. They won’t have any reason to downgrade us. In fact, S&P are probably looking at this and wondering if they downgraded us too early!"

Of the three major ratings agencies Moody's, S&P and Fitch, only Moody's has South Africa's sovereign debt at investment grade. 

In 2017 S&P and Fitch both downgraded the country to non-investment grade. 

'Confidence booster'

Ngwenya praised the return of Nene and Gordhan to Cabinet. 

"Nene coming back is a big confidence booster and shows integrity in terms of corporate governance and credibility around the ministry of finance.

"Pravin Gordhan has been doing a great job with the Eskom Inquiry, so now having him at public enterprises will be a continuation of that.

"The omission of [Minister of Mineral Resources] Mosebenzi Zwane and [Fikile] Mbalula, two people who are implicated in the state capture inquiry, instills confidence that justice will prevail," she said.

Zwane is set to be replaced by ANC chairperson and former general secretary of the National Union of Mineworkers Gwede Mantashe

Ngwenya said she was however disappointed to see that Angie Motshekga remains at basic education. "The only way that we can solve our unemployment problem is by fixing our education," she said. "I am heartened [however] to see that Naledi Pandor is in at higher education."

Lesiba Mothata, executive chief economist at Alexander Forbes Investments, told Fin24 it appears Ramaphosa has "gone back to the talent that was purged by the previous president".

"It will bring a lot of security, especially in the finance ministry. Now with Nene back, the expenditure ceiling will be implemented. That, as well as the wage bill, originated from him.

"A lot of what we have subsequently got used to in terms of the language of consolidation in the budget clearly came from him as well. The markets will like him and find security in his appointment."

'Business-friendly reshuffle'

Political analyst Daniel Silke said the new Cabinet appears market-friendly

"[This is a] business-friendly or market-friendly reshuffle - especially regarding Nene and Gordhan being back in Cabinet and Mantashe at minerals.

"There will be a sigh of relief in the markets that finance is in credible hands of those who understand the investor."

But he noted that the new Cabinet also includes compromises. 

"Ultimately Ramaphosa still pays homage to the Zuma era by retaining the likes of [Malusi] Gigaba, who is going back to home affairs," he said. 

Silke said it is unfortunate that Ramaphosa was unable to shake off some of the more controversial aspects of the Zuma era, like David Mabuza as deputy president.

"People will see him (Mabuza) as the ghost of the Zuma era still alive and kicking in the new Cabinet," he said. 

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