All eyes on Cyril’s cabinet; especially the rand

Ramaphosa will be inaugurated on May 25 and is expected to announce his new executive by May 27. He faces the challenge of establishing a more streamlined administration free of ministers tainted by graft and able to implement tough economic reforms. A misstep on key appointments could fell the rand, which has outpaced the emerging-market average appreciation since the May 8 election.

South Africa's currency has gained 1.3% to 14.2447 per dollar since the poll, and may extend its advance to 13.20 per dollar by year-end provided the new cabinet inspires confidence among investors, according to Morgan Stanley. The options market is giving a one-in-two chance of reaching that level, according to Bloomberg's probability calculator.

"We are keen to see whether some ministries could be consolidated to give a lower overall number of cabinet posts," Morgan Stanley strategists including Hans Redeker, James Lord and Sheena Shah wrote in a note to clients. "This would be positive for streamlining policy and an indication of Ramaphosa's growing authority within the ANC."

Investors want clarity on the positions of Finance Minister Tito Mboweni and Public Enterprises Minister Pravin Gordhan, or potential replacements should either of them step down, the strategists said.

Mboweni is on the ANC's list of elected lawmakers, increasing the chance he will remain in his post.

A poll conducted by Citigoup Inc. on May 14 found that less than 50% of respondents expected Ramaphosa to appoint reform-minded ministers, but most believed he would cut its size. In this scenario, assets would not rally. Only 20% or so expected him to both downsize the cabinet and appoint loyal and untainted ministers to key portfolios. This would unlock the potential for South African assets to rally, according to Citigroup.

An internal report by the ANC in February recommended that Ramaphosa slash his cabinet by close to half. The move would reduce the executive inherited from Jacob Zuma to 40 from 72, with 25 ministers and 15 deputy ministers. The presidency said the reconfiguration plan would be announced before any cabinet appointments.