The May 28 cabinet announcement is perhaps even more important than the actual election results.
With the elections behind us, investor focus will shift to President Cyril Ramaphosa’s ability and political will in addressing issues of concern. Chief among these: the composition of cabinet to be announced on May 28, transforming the economy with the promised policy reform, and resolving the problem that Eskom poses to South Africa.
Shaving cabinet positions would send a signal that Ramaphosa is serious about bringing stability to government finances and reducing ballooning expenses. International investors are therefore likely to wait until after the cabinet announcement before making any decisions or commitments in terms of foreign direct investments into the country.
Ramaphosa’s attempts to rebuild trust and confidence, and drive investments in the key manufacturing and mining sectors, demonstrates that he understands the issues at play. That said, once Eskom’s unbundling is complete, the more lucrative transmission component should be able to enter into public private partnerships, given that it should have lower debt levels than the generation and distribution components. If the generation and distribution components remain state-owned, government will be better able to secure jobs in those units as promised.
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