manuel seen as key to sa after mbeki  
17 June 2008

Will market favourite Trevor Manuel, one of the world’s longest-serving finance ministers, stay on in the office he has held since 1996?
African National Congress (ANC) 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 prices 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 , which in other circumstances should have benefited from record global commodity prices, has lost more than 15% so far this year.

“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.

“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.” he said Manuel’s position was particularly important with central bank governor Tito Mboweni also likely to leave. Mbeki, Manuel and Mboweni have between them dominated economic policy. Analysts say they are also looking to see how many of Manuel’s key public servants at the treasury stay on.

“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 on to the ANC’s national executive committee.
“It would be good if he did stay on,” said Gartmore head of emerging markets Chris Palmer. “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 SA it would be good if they were moving into government as well.”

Reuters, Peter Apps, www.businessday.co.za