Thursday, June 19, 2008

Questions surround Manuel's future

As some of you may have deduced, I am no fan of the ANC. The ANC is an organization bereft of morals and ethics and stocked with liars and thieves that would have made Blackbeard's ship of pirates look like choir boys.

However, a few semi-bright sparks remain and Manuel is one of them. In a box full of blunt pencils, he needs less sharpening. If he goes, watch the rand go down with him.

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South Africa is only a year away from a new president and with economic risks mounting, foreign investors are apprehensive about who will head the continent's most important finance ministry.

Will market favourite Trevor Manuel, one of the world's longest serving finance ministers, stay on in the office he has held since 1996?

ANC leader and former Deputy President Jacob Zuma is expected to succeed Thabo Mbeki, worrying some investors who fear increasingly leftist policies backed by his union and communist allies.

Zuma may wish to start afresh, distancing his administration from Mbeki's, while Manuel, who carried considerable clout in Mbeki's cabinet, has often said a minister should not stay in a post indefinitely.

As the economy struggles in the face of power cuts that have hurt the key mining sector, rising food and fuel-driven inflation in double digits and a gaping current account deficit, many funds have chosen to cut back on South African assets.

The rand currency ZAR, which in other circumstances should have benefited from record global commodity prices, has lost more than 15 percent so far in 2008.

"The only saving grace is that we have a finance minister who is reform-minded and aims to be market friendly," said UBS head of emerging market currency strategy Bhanu Baweja. "If it weren't for Trevor Manuel, the currency would be much lower."

The question for many investors is whether - and for how long - Manuel would remain in his job after Mbeki stands down having served his two terms after polls in 2009. Some say they see him standing on for at least a year, others expect him to make way for a new generation.

"It is definitely something people are looking at," said Standard Chartered chief Africa economist Razia Khan.

"Keeping him on for a period would be a good way of reassuring foreign investors that nothing important is likely to change as far as they are concerned."

She said Manuel's position was particularly important with central bank governor Tito Mboweni also seen leaving. Mbeki, Manuel and Mboweni have between them dominated economic policy.

Analysts say they are also looking to see how many of Manuel's key civil servants at the Treasury stay on.

Goldman Sachs analyst said in a research note that a delay in starting a corruption trial for Zuma made his eventual takeover more likely.

"The main political economy risk appears to be succession at the National Treasury and what it means for budget surpluses and inflation targeting," wrote Goldman Sachs analyst Ashok Bhundia in a research note.

"Manuel would probably demand a very high degree of autonomy as a condition for remaining in government ... it may then boil down to how much political capital Zuma is prepared to spend on keeping the current finance minister and risk the wrath of the left wing of his support base."

Despite being associated with Mbeki, Manuel was one of only a few of the present cabinet re-elected onto the ANC's national executive committee.

With Zuma and other ANC leaders seeming unwilling to discuss who might take over in the event Manuel leaves, some investors say part of the problem is the lack of options.

"It would be good if he did stay on," said Gartmore head of emerging markets Chris Palmer, who manages a range of portfolios including the $1-billion (about R8-billion) Gartmore Sicav Emerging Markets fund.

"But it would be even better if there were five more of him waiting in the wings. We know there are a lot of people coming up through various companies in South Africa - it would be good if they were moving into government as well."

He said the current government had made mistakes in several key areas, not least the failure to ensure proper investment in the electricity sector leading to now crippling shortages.

His fund is deliberately underweight South Africa, he said, and sees much of the appeal of companies such as mobile phone operator MTN MTNJ.J as lying in their ability to access the broader African continent and take advantage of growth there.

The International Monetary Fund sees African continental growth of 6.5 percent in 2008 - in contrast to South African growth, currently running at an annualised 2.1 percent.

ING economist Dorothee Gasser said she believed many investors had already accepted the loss of Manuel - and should be less concerned over Zuma's links with union and leftist groups, saying these were backing him out of a lack of alternatives.

That gave Zuma considerable flexibility not to need to accept all their demands, she said.

She said she saw ANC deputy leader Kgalema Motlanthe, a left-leaning intellectual popular in both the Mbeki and Zuma camps, as a possible finance minister.

Motlanthe has also been touted as a possible presidential candidate if Zuma is forced to step down as a result of a corruption case. The bribery trial linked to an arms deal was expected to start in August, but his lawyers say it will likely be pushed back for procedural reasons.

"What people forget is that the unions and communists are partly backing Zuma out of desperation," ING's Grasser said.

"They have no one else to turn to."

1 Opinion(s):

Anonymous said...

I dont share your view that Manuel is a competent Finance Minister. Many moons ago I read that Mbeki appointed George Soros to handle the SA Economy and given that Manuel has no academic qualification other than a Matric certificate then he is to my mind no more than a puppet and messenger of Soros.Add to that,that Manuel never speaks at International Finance Conventions.He only attends which again leads me to believe he is only the puppet who likes to hand out lollipops at his annual Budget speech. Never forget that in 2006 he was boasting about a surplus and within 12 months the Country was plunged into darkness amid evidence that the ANC had neglected Eskom and the National Power Grid for 14 years. Shows no foresight on his part and makes him look a tad foolish.I reckon he is just a token coloured put in place to make the ANC look non-discriminatory and there to voice the instructions of Soros and the Industrial oligarchs.