By Bhargav Acharya and Kopano Gumbi
JOHANNESBURG (Reuters) -South African assets gave up some gains on Monday as the initial optimism shown by the markets waned a day after President Cyril Ramaphosa formed a new cabinet.
Some investors earlier said the gains were likely to be short-lived as it would take time for the new government’s agenda and performance to become clear.
At 1530 GMT the rand traded at 18.29 against the dollar, around 0.5% weaker than its previous close. The rand had jumped more than 1% earlier in the day.
Ramaphosa named Democratic Alliance (DA) leader John Steenhuisen as agriculture minister in his 32-member cabinet line-up on Sunday. Alongside the DA and his African National Congress (ANC), Ramaphosa made space for five other coalition parties in the cabinet.
While the ANC retained control of the finance, defence and foreign affairs ministries, analysts saw the inclusion of the pro-business DA in other key portfolios as positive, while they welcomed the fact that Finance Minister Enoch Godongwana remained in his post.
“The outcome is clearly a compromise, and both of the major coalition players have had to accept less than what they would have preferred,” said Markus Korhonen, senior associate in Strategic Intelligence at S-RM, referring to the ANC and DA.
Jee-A van der Linde, senior economist at Oxford Economics, said it remained to be seen whether the unity government formed by Ramaphosa would be able to address South Africa’s economic issues, but the new cabinet was a “business-friendly” outcome.
Ramaphosa’s ANC lost its majority for the first time in three decades in the May 29 election and has formed a unity government with former rivals as a way to stay in power.
Jason Swartz, portfolio manager at Old Mutual Investment Group, earlier attributed the market gains to “a bit of a sugar rush.”
“We’re going to need to see a little bit more information around actual tangible changes that we will see to policy and an implementation of those policies,” he said.
Korhonen said the focus now would be on the new government’s legislative agenda.
“A formal legislative agenda would provide a good indication of those issues that the government will set out to achieve, and what they might decide to deprioritise considering the potential difficulties in reaching agreement across the coalition,” he added.
On the domestic economic front, a purchasing managers’ index survey showed factory activity contracted again in June. Vehicle sales figures for June showed a decline.
On the Johannesburg Stock Exchange, the Top-40 index closed around 0.2% weaker. The country’s benchmark 2030 government bond rose, with the yield down 3 basis points at 9.955%.
(Reporting by Bhargav Acharya, Kopano Gumbi and Tannur AndersEditing by Alexander Winning, David Goodman, Anil D’Silva and Sharon Singleton)
