By Bhargav Acharya and Kopano Gumbi
JOHANNESBURG (Reuters) -South African assets gave up some gains on Monday as markets’ initial optimism waned a day after President Cyril Ramaphosa formed a new cabinet.
Some investors previously said the gains were likely to be short-lived as it would take some time for the new government’s agenda and performance to become clear.
At 1530 GMT, the rand was trading at 18.29 against the dollar, about 0.5% weaker than its previous close. The rand was up more than 1% earlier in the day.
Ramaphosa on Sunday appointed Democratic Alliance (DA) leader John Steenhuisen as agriculture minister in his 32-member cabinet. In addition to the DA and his African National Congress (ANC), Ramaphosa made room for five other coalition parties in the cabinet.
While the ANC retained control of the finance, defense and foreign affairs ministries, analysts viewed the pro-business DA’s inclusion in other key portfolios as positive, while welcoming the fact that Finance Minister Enoch Godongwana remained in his post.
“The outcome is clearly a compromise, and both major coalition players have had to accept less than they would have liked,” said Markus Korhonen, senior associate in Strategic Intelligence at S-RM, referring to the ANC and the DA.
Jee-A van der Linde (NYSE:), senior economist at Oxford Economics, said it remained to be seen whether the unity government formed by Ramaphosa would be able to tackle South Africa’s economic problems, but the new cabinet was a “business-friendly government.” ” outcome.
Ramaphosa’s ANC lost its majority in the May 29 elections for the first time in three decades 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, previously attributed the market gain to “a bit of a sugar rush.”
“We’re going to need some more information on actual tangible changes that we’re going to see in the policies and the implementation of those policies,” he said.
Korhonen said the focus would now be on the new government’s legislative agenda.
“A formal legislative agenda would provide a good indication of the issues the government wants to achieve, and what it might decide to deprioritize given the potential difficulties in reaching agreement within the coalition,” he added.
On the domestic economic front, a Purchasing Managers Index survey showed that factory activity contracted again in June. Car sales figures for June showed a decline.
On the Johannesburg Stock Exchange, the Top 40 index closed about 0.2% weaker. The country’s 2030 government bonds rose, with yields falling 3 basis points to 9.955%.
