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October 22nd, 2017 by


Yet again, President Jacob Zuma is in the news for throwing his authority around. This is his second cabinet reshuffle in just seven months.

The reshuffle saw the firing of Communist Party leader and former Higher Education Minister, Blade Nzimande.

This was, as many political analysts believe, to be a rather strategic decision on the President’s part. In the run up to the end of year presidential conference, the fight for ANC leadership is up for grabs.

But with the recent 5% inflation hike and unstable economy, how will this affect you?

We find out…

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The Fight To The Finish Line

This time around, Zuma has changed the ministerial positions of six MPs. The biggest change was of course the ousting of Nzimande.

Zuma’s ex wife, Nkosazana Dlamini-Zuma is going neck-to-neck with the Communist Party’s Cyril Ramaphosa for ANC leadership.

Now that Nzimande has been fired, Zuma is hoping that this would rupture the existing alliance between the ANC and SACP, giving hope to Dlamini-Zuma.

Zuma’s constant reshuffling, is causing a lot of uncertainty within the market.

According to Anchor Capital’s Fund Manager, Nolan Wapenaar, South Africa’s future can go either way.

“As time goes by, we are eating (day by day) into the safety cushion between ourselves and our next downgrade.   With allowing enough time to pass, the next downgrade becomes inevitable. “

What’s The Current Situation?

Although this sudden reshuffle caused a sense of fear in South Africa,it didn’t cause as much of a stir as the previous reshuffle in March this year.

The March reshuffle saw the former Finance Minister, Pravin Gordhan lose his position.

According to Economist and owner of Economists.co.za, Mike Schussler, the latest reshuffle shouldn’t have any long-term effects on the economy.

“Very little if any, other than the Energy Minister who may tie up some deals that South Africans will pay for for a long time. But that we do not know yet,” explains Schussler.

Schussler mentioned that the reshuffle should not cause the country to drift further into junk status, however the lack of growth and the government’s growing debt might.

Read more about the Zuma Shuffle below

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Will This Affect Your Pocket? 

It might not have a direct impact on your pocket, however if you are investing overseas, you could expect less for your buck.

Just after Zuma’s announcement, the Rand depreciated by 1.1% as well as trading 0.3% lower at 13.42/$1 on Wednesday morning.

“Foreign investors are concentrating on the local economy and the energy portfolio is just one part of the economy. They generally do not worry much on Home Affairs or security portfolios as they worry about finance and treasury; SARB; DTI and SARS and perhaps also economic ministry,” adds Schussler.

SA’s Future

South Africa is currently in junk status and this will take a very long time for the country to stabilize again.

If you are planning on importing goods from overseas – now is probably not the right time as the Rand is quite weak. Although it is weak, it is stronger than it was in March this year. During this time, the Rand was sitting at R13.60/$1.

Schussler isn’t really too concerned about the affect that this reshuffle will have on the economy. It is more the greater picture of the country that unsettles him.

“We are worried that SA economy is not growing and not creating jobs like the rest of the world is doing. But this will be clearer in about three or four months time (hopefully) after the ANC has voted on its leadership. Depends who wins and what policies they want to promote,” mentions Schussler.

Schussler recommends that SA investors remain focused and not be swayed by the current happenings in the country. “Stay focused on what you are doing and stay away from noise.”

 

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