Goldman Sees South Africa’s ‘Fragile’ Coalition Spurring Growth

(Bloomberg) -- South African President Cyril Ramaphosa announced his new cabinet, allocating ministerial posts to business-friendly opposition politicians while retaining close ally Enoch Godongwana as finance minister and signaling his intent to revive anemic economic growth.

Most Read from Bloomberg

• Democrats Weigh Mid-July Vote to Formally Tap Biden as Nominee

• Trump Immunity Ruling Means Any Trial Before Election Unlikely

• ‘Upflation’ Is the Latest Retail Trend Driving Up Prices for US Consumers

• Beryl Becomes Earliest Ever Category 5 Hurricane in Atlantic

• Trump Isn't Going to Like the Supreme Court's Immunity Decision

The announcement of the new executive came a month after the African National Congress lost its parliamentary majority in May 29 elections and was forced to invite its rivals to join a broad coalition government. Almost a dozen parties accepted the offer and agreed to back Ramaphosa’s reappointment as president in exchange for being allocated other posts.

The presence of opposition parties may help the new administration tackle state ineptitude, power shortages and logistics snarlups that have curtailed economic growth and investment, and fueled already sky-high unemployment. Gross domestic product has expanded by less than 1% a year on average over the past decade — well below what’s needed to maintain living standards for the growing population.

“Given the multiparty arrangement in the new government, we see some upside potential for reforms, which could accelerate given greater accountability/oversight,” Goldman Sachs International Inc. economist Andrew Matheny said in a note on Sunday. “That said, the coalition might ultimately prove fragile.”

South African financial assets have rallied in recent weeks in anticipation of a deal bringing the business-friendly DA and other conservative parties like the Inkatha Freedom Party into the executive. The government excludes the leftist Economic Freedom Fighters and former President Jacob Zuma’s uMkhonto weSizwe party, which together garnered almost a quarter of the vote in the election.

“The incoming government will prioritise rapid, inclusive and sustainable economic growth and the creation of a more just society by tackling poverty and inequality,” Ramaphosa said in his weekly statement on Monday. “It will continue the economic reforms that are underway in key industries like electricity, telecommunication, water and transport.”

The rand gained as much as 1.1% and traded 0.8% stronger at 18.0527 per dollar by 7:50 a.m. in Johannesburg. The nation’s benchmark stock index has risen 3.3% since the election on expectations that the inclusion of centrist parties in the government will add impetus to reforms Ramaphosa has already initiated to kickstart economic growth.

The president had to walk a tightrope balancing demands from within his own party, its labor union and communist allies to retain control of key portfolios, and those of the new participants in the government who insisted that they not be relegated to secondary roles. The ANC will have 22 members in the cabinet.

Among key appointments, John Steenhuisen, the leader of the Democratic Alliance which polled the second-most votes in the May election, was named minister of agriculture. Six of the cabinet members are from his party.

Velenkosini Hlabisa, the leader of the Inkatha Freedom Party that finished fifth in the elections, was appointed cooperative governance minister.

Other major changes include moving Ronald Lamola from the justice ministry to foreign affairs, and the replacement of Bheki Cele as police minister by Senzo Mchunu, who was previously at water affairs.

Among the initial tasks of the incoming government will be to convene a so-called national dialogue that will seek to determine how to address the key challenges facing the country. South Africa has one of the highest unemployment rates in the world and is ranked by the Thomas Piketty-backed World Inequality Lab as the most unequal country in the world for which data is available.

“The naming of the cabinet is only the start of the government of national unity and hard work now lies ahead for a diverse group of people that needs to put party affiliation aside and pull in the same direction to address South Africa’s many structural challenges,” Oxford Economics Africa Senior Political Analyst Louw Nel said in a note.

Other key appointments include:

• Paul Mashatile remains deputy president.

• Kgosientsho Ramokgopa is minister for energy and electricity

• Gwede Mantashe is mineral and petroleum resources minister after the energy portfolio was combined with electricity

• ANC lawmaker Parks Tau is the new trade and industry minister

• The DA’s Leon Schreiber becomes the home affairs minister

• DA lawmaker Ashor Sarupen becomes a second deputy finance minister

• Former Environment Minister Barbara Creecy moves to the transport portfolio

You can follow Bloomberg’s reporting on Africa on WhatsApp. Sign up here.

--With assistance from Rene Vollgraaff, Monique Vanek and Mike Cohen.

Most Read from Bloomberg Businessweek

• The Fried Chicken Sandwich Wars Are More Cutthroat Than Ever Before

• Online Shopping Warehouses Are Reshaping Rural America

• Japan’s Tiny Kei-Trucks Have a Cult Following in the US, and Some States Are Pushing Back

• RTO Mandates Are Killing the Euphoric Work-Life Balance Some Moms Found

• The FBI’s Star Cooperator May Have Been Running New Scams All Along

©2024 Bloomberg L.P.