Johannesburg – George Herman, director and chief investment officer of specialist wealth management company Citadel, says South African consumers may benefit from lower inflation and interest rates if recent political changes boost economic growth.
On Monday night President Cyril Ramaphosa announced his new Cabinet, which includes Pravin Gordhan as minister of public enterprises, Nhlanhla Nene as minister of finance, and Gwede Mantashe as minister of mineral resources.
Herman said levels of optimism around Ramaphosa and his newly elected Cabinet have not been seen since 1994. “He (Ramaphosa) has immediately started delivering by ringing in changes at state-owned enterprises and now the Cabinet. This engenders trust,” he said.
The trust that Ramaphosa has instilled in the country since his appointment has already benefited the economy, Herman said, with a stronger currency and foreigners buying more than R10bn worth of bonds last week.
Investor sentiment will be boosted even further if and when the reviewed Mining Charter is renegotiated. Ramaphosa intervened in the Mining Charter matter shortly after his inauguration, to assure the Chamber of Mines that the controversial charter would be looked at again. As a result, a court case between the chamber and former mining minister Mosebenzi Zwane has been postponed by mutual agreement.
“Capital is bound to flow into the country as policy certainty is attained and corruption made a swear word again,” Herman said.
He said if an amicable renegotiation of the Mining Charter is conducted, it would “stimulate economic growth by some 1%, but possibly even 2%, which would take our growth to the 3% level”.
Furthermore, with the economy growing Herman said the average South African consumer will gain from the stronger rand which will keep inflation rates low.
He added that with a firmer local currency, the South African Reserve Bank may also reduce interest rates.
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