Advertisement
Features

Ramaphosa’s flying start

The first few days of Cyril Ramaphosa’s tenure as president of South Africa have been very encouraging.

885_MW_P05_Markets
Ramaphosa: steering a deft course

South Africa "has a miraculous knack for escaping from tight spots before the worst happens", says Rian Malan in The Spectator. It achieved a peaceful end to apartheid in 1994. And now it appears to be turning the page on almost a decade of corruption and ineptitude under former president Jacob Zuma that came close to destroying democracy and sinkingthe economy.

Advertisement - Article continues below

Zuma finally resigned a fortnight ago and was replaced by the pragmatic and business-friendly former trade unionist Cyril Ramaphosa. The first few days of Ramaphosa's tenure have been very encouraging, with the government presenting a budget that "steered a deft course between restoring fiscal discipline and maintaining vital social spending", as Craig Mellow notes in Barron's. It raised VAT for the first time in 25 years and imposed cuts on "a bloated bureaucracy".

Along with a fair wind from the global economy, this implies the public-debt-to-GDP ratio will remain below 60%, a level it was expected to breach by 2022. That in turn should mean a downgrade of local-currency debt by Moody's, the last of the three major credit-ratings agencies to deem it investment-grade, should be avoided.

The symbolic breach with the spendthrift Zuma years was clear from the budget, but Ramaphosa needs "honest, competent people" to get South Africa back on track, says The Economist. He made a big step in the right direction with a cabinet reshuffle this week in which he purged several Zuma allies and reinstalled two figures investors have always respected.

The return of competence

Nhlanhla Nene has returned as finance minister, having been fired by Zuma in 2015 for resisting lavish spending on the former president's pet projects. Another respected and hawkish former finance minister, Pravin Gordhan, who was also fired by Zuma last year, will now be supervising state-owned companies, which became the epicentre of corruption and cronyism during Zuma's tenure. There will be a second cabinet reshuffle later this year, notes Joseph Cotterill in the Financial Times, which should bring further changes. The number and size of ministries is being reviewed; they expanded to accommodate Zuma's pliable cronies. That said, there is still a great deal to do, notably fixing the education system and making it easier to hire and fire workers to make a dent in an unemployment rate of almost 30%.

South African stocks are not a close reflection of the overall economy, as the local index is skewed towards commodities and the media sector. But for those contemplating a punt on the recovery, the long rand bear market should be over while the bond market rally, says George Hay on Breakingviews, "has further to go".

Advertisement
Advertisement

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Listed companies are dying out, and that could have serious consequences
Stockmarkets

Listed companies are dying out, and that could have serious consequences

Private equity is taking over from public stockmarkets as the biggest provider of capital to companies. That’s bad for investors and bad for society a…
3 Aug 2020
Reasons for investors to be cheerful
Investment strategy

Reasons for investors to be cheerful

Markets are betting on a V-shaped recovery – and recent data suggests that they may be right.
3 Aug 2020
1 August 1981: MTV goes on air
This day in history

1 August 1981: MTV goes on air

On this day in 1981, MTV went on the air. It was an instant success, gaining two million viewers within less than a year.
1 Aug 2020

Most Popular

Gold bugs' dreams are coming true – but we could still see a V-shaped recovery
Gold

Gold bugs' dreams are coming true – but we could still see a V-shaped recovery

John and Merryn talk about how it's perfectly reasonable to expect a V-shaped recovery and to continue holding gold as well. Plus, inflation, staycati…
30 Jul 2020
UK banks have had a shocking week – so it’s probably a good time to buy
UK stockmarkets

UK banks have had a shocking week – so it’s probably a good time to buy

Lloyds Bank reported a £676m loss this week. And, with all of the UK's high street banks having a terrible time of things, bank stocks are detested ri…
31 Jul 2020
The charts that matter: gold finally sets a new record high 
Global Economy

The charts that matter: gold finally sets a new record high 

As gold surges past its previous high, John Stepek looks at how it's affected the charts that matter most to the global economy.
1 Aug 2020