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Rand drops on Zuma's surprise 'pro-nuclear' Cabinet reshuffle

Oct 17 2017 11:04

Cape Town - The rand lost more than 0.5% within minutes of President Jacob Zuma's announcement of yet another surprise Cabinet reshuffle.

The biggest move is that of energy - Mmamoloko Kubayi has been moved from the energy portfolio to communications, with David Mahlobo now occupying the position of Minister of Energy.

Other changes include Hlengiwe Mkhize moved to Minister of Higher Education and Training while Ayanda Dlodlo is the new Minister of Home Affairs, Bongani Thomas Bongo is the Minister of State Security and Buti Manamela is the Deputy Minister of Higher Education and Training.

Desperate attempt to force through nuclear deal?

Currency dealers at TreasuryOne questioned the energy portfolio reshuffle, citing "a possible new nuclear deal trying to be pushed through".

"This is all about the nuclear deal. David Mahlobo has accompanied the president on visits to Russia, presumably to lay the ground for the Rosatom nuclear deal," said Lawson Naidoo of the Council for the Advancement of the South African Constitution.

Safcei spokesperson Liz McDaid said: "Since our court victory, there has been nothing happening regarding the outcome for the nuclear programme. We suspected something was happening behind closed doors. Last Friday's nuclear site authorisation and now today's Cabinet reshuffle has seen the intelligence minister become the energy minister. This is a desperate attempt to force through the nuclear deal."

By 10:59 the local unit was trading at R13.37 to the US dollar, from an overnight close of R13.31 and intra-day low of R13.29/$. The unit immediately spiked to R13.39 against the greenback on the reshuffle news.

Political analyst Daniel Silke told Fin24 in an emailed response for comment that there are two aspects to the latest Cabinet reshuffle. "Firstly, Mahlobo is seen as close to Zuma and someone who can drive the nuclear deal, so I agree that it is relevant. The second part is the axing of Blade Ndzimande and the demise of SACP representation at a senior level in the Cabinet.

"While the nuclear deal might play a role on the one hand, Zuma is clearing out his political enemies with Ndzimande's departure as well. The reshuffle is likely to stoke the strains in the Alliance although it is an indicator that Zuma now barely cares about the role of the SACP," he said.

Jameel Ahmad, VP of Corporate Development and Market Research, FXTM said the  rand has shown some weakness following the news of Zuma's Cabinet reshuffled, but the volatility hasn't been that severe.

"However, the weakness in the rand following the announcement does show that the currency is still sensitive to political risk. Perhaps the markets have become desensitised to this kind of political maneuvering as it is the second time this year, and the 11th time that the Cabinet has been reshuffled during his presidency,” said Ahmad.

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