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Peter Attard Montalto
14 Dec 2015 00:14
"We should remember that the national treasury was not an 'easy' place under Pravin Gordhan in the past." (Madelene Cronje, MG)
You can’t make this up. After the shock appointment of David van Rooyen on Wednesday night he didn’t even have his feet under the desk and he is now off to be minister of co-operative governance with Pravin Gordhan moving back to his old job as minister of finance.
Our initial understanding is that there was such a sense of country-wide grief at the loss of Nene and gloom and pessimism from civil society, business, unions and others that mobilisations were increasingly made within the ANC, to ANC Secretary General Mantashe especially, which forced this change.
He is very market friendly, fiscally conservative and a welcome move (though I suppose this begs the question why we simply couldn’t go back to Nene?!).
Fiscally, I think we are now back to where we were post MTBPS – medium run risks which treasury will grapple to deal with in a low growth environment, adding in NHI, tax challenges etc.
Markets should rally back very strongly but I would not expect a total retracement with a permanent loss of trust in leadership even if we are in a better place. Better levels will also give people an opportunity (and liquidity) to exit in a way that wasn’t possible in the second half of last week. Unpredictability premia and the SAA and nuclear issues still there will demand some weakness remain. I think we also see a degree of permanent negative shock into growth and private sector investment. The SARB will likely have to still do a large hike in January after this and given (let’s not forget!) the Fed is coming up this week. Maybe we are talking 50bp now rather than 100bp as we were previously thinking about. The SARB, staying quiet, not intervening and not doing emergency meetings, comes out of this looking very good, however.
What this tells us is that whilst last Wednesday looked like a strong and powerful move by Zuma – a victory for the tenderpreneurs – the fact the ANC is a broad church has actually forced him to reverse his decision in a very damaging move for him personally. It may also speak to a more nuanced split of ANC with the left and conservative centre left able to still have more influence than thought before.
For me, this raises the risk of a recall especially as the economic damage becomes evident. That risk remains low, however. We are in a situation where Zuma clearly thinks he has a lot of power but actually it’s more nuanced. Internally in ANC and among the 2017 electorate I wouldn’t downplay people seeing this as a positive that he “listened” and “changed his mind”. The narrative I was thinking last week of maybe this action hastening a shift (maybe even an early elective conference to avoid Ramaphosa taking over) to Dlamini-Zuma is still valid. However, this must harm her camp to some degree to the benefit of Ramaphosa.
Nene remains in the wilderness which I think speaks to the fact his sacking was “real” and “personal” around SAA and nuclear etc and it was not an acceptable political option to bring him back. Putting Van Rooyen in co-operative governance saves him some face but the problem remains that he has no experience.
All eyes will increasingly remain on politics and especially that “other” reshuffle (energy) we still see as on the cards maybe in the new year now. We also watch to see the level of economic damage done in the upcoming data.
Peter Attard Montalto is an analyst at Nomura
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