The rand and the JSE weakened sharply on the JSE following President Jacob Zuma’s latest cabinet reshuffle - the second in less than seven months - with financial stocks battered by the news.
The rand fell more than one percent to R13.4543 against the US dollar by 5 pm yesterday from a day’s high of R13.27.
The JSE all share index, which breached the 58 000 mark for the first time on Monday, also surrendered the gains, shedding 280 points to 57 833.
The benchmark top 40 index also traded 0.39 percent weaker to 51 510 points, while the financial stocks on the local bourse shed 317 points to 42 658 points.
Analysts from Investec said in a note that while market focus was likely to rest with industrial production and manufacturing stats out of the US for a further update on the underlying cyclical strength of the US economy, the local front remained dominated by politics, factionalism, corruption, nepotism and court battles.
“This will be the theme in the run-up to the ANC’s Dec elective conference and may well extend beyond that with the culture of the organisation unlikely to change back just because of new leadership.”
“Nonetheless, whilst South Africa’s economy continues to underperform, it lends itself to a more balanced foreign exchange flow environment with some support for the rand,” Investec said.
The announcement of the cabinet reshuffle raised speculation that the nuclear energy deal could now be fast-tracked with David Mahlobo at the helm and Mmamoloko Kubayi removed to communications.
Economist Lumkile Mondi said Mahlobo - who is considered a Zuma’s confidante and loyalist - would ensure that the programme was implemented.
“He will do whatever the shadow state wants him to do. He is there to ensure that, in light of the uncertainty regarding the National Prosecuting Authority, the good times continue to roll on the back of South African resources.
Raymond Parsons, a professor at the North-West University School of Economics, said the frequency of the reshuffles come at a high cost to the economy.
Parsons said the extent to which constant changes at the top of government and the public sector were made contributed to policy uncertainty.
“If it is true that new Energy Minister Mahlobo has been selected to expedite the controversial nuclear deal, it clashes with the definitive statement made by Finance Minister Gigaba at the International Monetary Fund meeting last week that SA could simply not afford the nuclear project at present,” Parsons said.
Barclays Africa’s share price tanked 1.80 percent to R145.68, while FirstRand eased 1.48 percent to R52.52 and Nedbank 0.77 percent to R214.51. Standard Bank weakened 1.46 percent weaker to R169, while Sanlam shed 1.01 percent to R71.58, with Old Mutual down 0.62 percent to trade at R35.28.
Gary van Staden, an analyst at NKC African Economics, said that the changes were unlikely to improve investor perceptions.
Van Staden said the changes would only reinforce the prevailing view of policy uncertainty.
“The signal externally will be that investors can expect no significant improvement from this new cabinet than was the case with the old one and that is the real damage this latest shifting of deckchairs will generate,” van Staden said.
The business committee also voiced its dismay at a second cabinet reshuffle this year.
Business Unity South Africa (BUSA) said it was concerned about the changes. Chief executive Tanya Cohen said BUSA was anxious about South Africa’s fiscal and macroeconomic position which required greater certainty on the direction and credibility of government policy.
Cohen said the changes could have impact on the forthcoming Medium Term Budget Policy Statement. “Stability and certainty are a prerequisite for business confidence, translating directly into the country’s economic growth potential,” Cohen said.
“Political and economic stability is required to ignite inclusive economic growth and generate much-needed employment and revenue to pursue our social goals. This latest reshuffle further undermines prospects for South Africa’s growth.”
- BUSINESS REPORT