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Ramaphosa's Cabinet: The good, the bad and the interesting for the economy

May 31 2019 08:59
Ferial Haffajee

You could almost see markets tick up as President Cyril Ramaphosa made his Cabinet announcement on Wednesday: as soon as he confirmed that Tito Mboweni would stay on as finance minister and Pravin Gordhan as minister of public enterprises, the rand strengthened and things looked up across indicators. 

Ramaphosa merged some ministries in the economic cluster, named some new ministers and shuffled others sideways. As the president vows to "forge a compact for growth and economic opportunity" in his new term, here are some good, bad and interesting trends to watch out for in his Cabinet. 

The Good

Stability across the key portfolios like at Treasury and Public Enterprises is a good thing.  The economy is in too precarious a state for experimentation and both Mboweni and Gordhan have shown themselves to be steady hands. 

Moreover, with Eskom now without a CEO after Phakamani Hadebe quit last Friday, it is unlikely that rating agencies would have looked kindly on another change to the political head who oversees the debt-laden power utility.  It’s likely that Ramaphosa will pay close attention to what happens at Eskom as his presidential review panel completes its work into what a restructured electricity utility may look like.

Dig a little deeper into the Cabinet choices and there is another important change. Thulas Nxesi has been appointed minister of labour and employment.  This is an important recognition of the fact that the “labour” part of the portfolio is designed to protect the employed working class, specifically unionised workers.  By adding employment to the ministry, Ramaphosa has signalled that the labour market must focus on jobs. 

Nxesi was a founding member of the SA Democratic Teachers Union (Sadtu) and is regarded as a deployee of the trade union and the SA Communist Party allies of the ruling party. It remains to be seen whether he will interpret his mandate as being bigger than looking after the interests of trade unions alone. 

The Bad

Minerals and Energy minister Gwede Mantashe is an amiable leader and a jovial one.  He has the President’s ear and is regarded as a member of Ramaphosa’s kitchen cabinet.  Entrusted with a vital portfolio, the question must be asked: is it too wide?

South Africa’s economy is still built on an 'minerals-energy complex', an interlinked ecosystem of mines and power stations.  But with coal-fired power stations going out of vogue more quickly than a can of sugar-addled Coca Cola, does enjoining them still make sense? The country's energy future must be comprised of significant renewable energy sources not tied to mining. 

In addition, Mantashe has slowed in making progress toward a system of mining regulation and rights that make sense to the industry. Just ahead of the elections, the Minerals Council announced it would return to court to seek clarity on the Mining Charter. 

There is no one in the Cabinet, other than Rampahosa and Mboweni, who has run a business (or directed one) with any significant degree of success.  Some ministers own stakes in small companies or have tried their own entrepreneurial ventures, but these are often companies created to get state tenders.  Their regulatory hand can thus be heavy-handed and their measure of unintended consequences insufficiently honed. 

The Interesting

Mboweni is a pragmatic leader who comes, most recently, from the private sector which he understands to be the engine of growth and innovation.  He has said so numerous times. 

Over at the Trade and Industry department, Ebrahim Patel will soon occupy the office.

Patel is of a different view: he is a supporter of a state-sponsored growth model where infrastructure, manufacturing and beneficiation are state-led imperatives. 

Mboweni and Patel's models of growth can work side-by-side, as several spectacularly successful Asian nations reveal.  But the South African experience shows that when the models are not well guided stasis can result, as SA has found over the last decade. This tension is something Ramaphosa is going to have to harness for good.   

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