In what it said was a sign of its confidence in President Cyril Ramaphosa’s ability to resuscitate the economy after the ANC’s victory in last week’s election, Goldman Sachs Group is expanding operations in SA.
Goldman Sachs, one of the world’s leading investment banks, also said that it had entered into a partnership with Investec to expand equity trading into the rest of Africa via Johannesburg.
The US lender, which has had a presence in SA for two decades, will also offer fixed-income products, including currency and government bond trading to corporate and institutional investors in the country.
Goldman Sachs already provides advisory, wealth- and asset-management services.
Structural reforms
The move is a "testament to our confidence in the unfolding structural reforms in SA, which should drive higher economic growth rates and economic opportunity for our clients and the people of the region", said Colin Coleman, head of the sub-Saharan Africa division.
"The long-term economic potential of SA is unquestionable," he said.
This comes less than a year after Deutsche Bank, in the midst of a global restructuring, said it would terminate its advisory, corporate-broking and sponsor services in SA, leading to as many as 50 job cuts.
In November, Reuters reported that Swiss bank Credit Suisse had pulled out of SA after more than a decade.
Coleman, who has headed the local division of Goldman Sachs since 2000, was among investors and analysts who said before the election that a decisive victory for the ANC would strengthen Ramaphosa’s bid to implement reforms.
He told Bloomberg that this would give the president the "political space to implement his modernisation agenda".
Made on the same day that Ramaphosa confirmed that he would trim his cabinet as a first step to creating an effective state, Goldman Sachs’s move was a major boost for the president, who might seek to use it to show that pledges to provide policy certainty, fix state-owned entities and implement structural reform are already paying dividends.
Cabinet cuts
The cabinet became bloated during Jacob Zuma’s administration, a move that not only put pressure on public finances but also derailed delivery, creating structures for dispensing patronage rather than service delivery.
On the economy, Ramaphosa, who served as deputy during Zuma’s last term, has had a tough start to his presidency, with SA slipping into a recession in the first half of 2018, while the latest data shows an increase in the unemployment rate to almost 28% in the first quarter of 2019.
"We’re now going to reconfigure our cabinet as part of the reform package our country needs for the economy to move forward and address the needs of our people," Ramaphosa said at a Goldman Sachs conference in Johannesburg.
"The key risk for us is low economic growth and creating jobs. The structure of government will speak to that," he said.
While it is not clear what the reconfigured cabinet will look like, Ramaphosa is set to announce a largely reduced executive after his inauguration on May 25. It will be the first cabinet he appoints from scratch after ousting Zuma.
Having narrowly won the ANC leadership against Nkosazana Dlamini-Zuma in December 2017, investors gave him the benefit of the doubt when he failed to remove some of the figures linked to the worst excesses of Zuma’s regime.
Investors and rating agencies will now be watching to see whether Ramaphosa has the political will and control over the ANC to replace them with capable appointees.
Candidate list
The governing party has already come under heavy criticism for including those implicated in state capture and corruption on its candidate list for the National Assembly.
Based on the seat allocation in parliament, some Zuma-era ministers will not be returning to parliament, including economic development minister Ebrahim Patel, agriculture minister Senzeni Zokwana and deputy minister of co-operative governance & traditional affairs Andries Nel.
The constitution makes provision for at least two non-MPs to be appointed to the executive.
Avior Capital Markets analyst Harry Botha said Goldman Sachs’s decision seemed to be a "meaningful commitment which suggests higher confidence in the country".
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