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Rand stable as markets digest Ramaphosa reshuffle

Feb 27 2018 10:01
Fin24

Cape Town – The rand strengthened to a three-year high of R11.52 to the dollar leading up to President Cyril Ramaphosa’s Cabinet reshuffle on Monday night, and remained stable in early trade on Tuesday morning. 

The local currency opened at R11.55/$, and was trading at R11.57 to the greenback at 09:15. 

Bianca Botes of Peregrine Treasury Solutions noted the fact that the rand remained steady after Ramaphosa's first reshuffle, in contrast to the sharp falls observed after some of former president Jacob Zuma’s Cabinet moves. 

Botes said the local currency stayed on an even keel mainly because markets anticipated the reshuffle.

The composition of the Cabinet reflects the pressure on South Africa's new president to maintain a united party, she said.

“Controversial placements such as David Mabuza as deputy president speak to the balancing act Ramaphosa is performing and indicate that although transformed leadership has taken place, the party as a whole has not been transformed,” she said.

The rand is expected to remain firm in the short term.

But Botes said there may signs of division within the ANC if Ramaphosa continues his clean-up of government.

She added that the appointment of Nhlanhla Nene as finance minister and Pravin Gordhan as minister of public enterprises will assist Ramaphosa’s government clean-up, and provide support for the rand.

Adam Phillips, Treasury specialist at Umkhulu Consulting, said Ramaphosa has placed the right people in many important ministries.

“However, there was not a clean sweep, with (Malusi) Gigaba, (Bathabile) Dlamini and (Nomvula) Mokonyane being given different positions, although they might not last for one reason or another,” he said.

'First-stage cleanout' 

NKC African Economics said on Tuesday morning that Ramaphosa's reshuffle was a "first-stage cleanout", adding that there may be further changes in coming months.

"The talking heads last night were disappointed that totally unrealistic expectations had not been met and pointed to the obvious short-term compromises that Ramaphosa was always going to make in pursuit of longer-term benefit.

"The reaction ignored the largest single purge of an ineffective and significantly corrupt Cabinet in post-democratic history," it said. 

It expects the rand to trade in a band between R11.45/$ and R11.75/$ on Tuesday.

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