President Jacob Zuma

Johannesburg – President Jacob Zuma’s Cabinet reshuffle, which saw Finance Minister Pravin Gordhan ousted late last night, has been met with resounding criticism.

Zuma sacked finance minister Pravin Gordhan in a cabinet reshuffle after days of speculation that has rocked the country's markets and currency, replacing him with home affairs head Malusi Gigaba.

A statement from the president's office just after midnight on Thursday said Zuma had also appointed Sfiso Buthelezi as Deputy Finance Minister replacing Mcebisi Jonas.

The CEO Initiative, which a body comprising several business leaders from companies such as Telkom, Standard Bank, Nedbank, Discovery and Investec, noted on Friday morning that the decision has “has severe consequences for economy”.

It says it is a setback to work done by government, labour and business to avoid a downgrade. South Africa late last year avoided being downgraded to junk when ratings agencies kept ratings stable. S&P and Fitch have SA a notch above junk, while Moody’s is two levels above non-investment grade.

The Initiative, which had been working with Gordhan to achieve inclusive economic growth, says any progress towards this has now been potentially undermined, and the consequent lack of investor confidence in South Africa will hurt the poor the most.

Read also: Gigaba an unknown quantity - analysts

“The CEO Initiative is gravely concerned and disappointed by the ill-timed and irrational dismissal of a trusted and well-respected Minister of Finance and Deputy Finance Minister. This decision, and the manner in which it was taken, is likely to cause severe damage to an economy that is in dire need of growth and jobs.

“The rationale for the removal of other ministers in key departments at a time when the country is beginning to make progress on a number of fronts is also questionable,” it says.

Important change

The Institute for Race Relations notes the most important change from the shuffle is that of Gigaba replacing Gordhan, and Buthelezi being appointed as the Deputy Minister of Finance.

“While Gigaba is well known, Buthelezi is less so. Buthelezi is a 55 year old economist who previously worked as an advisor to Zuma. Buthelezi also spent almost ten years as a political prisoner on Robben Island and holds a BCom (hons) degree in economics.”

IRR CEO Dr Frans Cronje says the long-expected shuffle does warrant caution by international investors. However, he notes, “foreign and domestic investors should look to judge it by the policy positions it adopts and the actions it takes.

“We expect a significant degree of hysterical reaction in the media and on social media over the next few days. A panicked response to the reshuffle will exacerbate its negative effects. Now is a time for cool heads and well informed and reasoned thinking on where South Africa is headed.”

Economic worries

Peter Attard Montalto, Nomura analyst, adds the market will struggle to digest Gigaba. “Someone who has been effective at home affairs but is clearly being put in a role to do a particular job by Zuma and viewed as loyal to Zuma. Similarly with Buthalezi.”

MMI economist Sanisha Packirisamy adds Gordhan and Jonas’ removal will be a key concern to markets. “In their previous capacity, they had played a crucial role in improving SA’s fiscal position and had put in place measures to curb corruption. They had also opposed unaffordable projects, such as the procurement of a nuclear fleet deemed to be unnecessary according to the latest Integrated Resource Plan, based on more realistic domestic growth assumptions.”

Packirisamy adds rand volatility is expected to remain high given the unpredictable moves in SA’s political setting currently. 

“At its worst point, the rand sold off against the US dollar by over 6 percent relative to its firmest point the afternoon prior to the cabinet reshuffle, but it remains stronger than levels seen at the beginning of the year.”

Cronje notes the new ministers, who will be sworn in at 6pm on Friday, come in at a time of very weak economic performance as debt levels have increased, the budget deficit remains under pressure, and the government's tax take as a proportion of gross domestic product is projected to reach a record level.

“The government also knows that ratings agencies and investors are watching its next moves closely and it will be interesting to see how the government now responds to investor concerns.”

Cronje adds the Institute expects Zuma's political enemies to launch a ferocious fight back over the next year. “This is far from the end of infighting and uncertainty in the government and the ANC – quite a number of years of instability may lie ahead.”

Packirisamy notes rating agencies will be evaluating SA shortly, Moody’s by April 7 and S&P on June 2. “A downgrade to sub-investment grade status would likely have a negative effect on SA’s near and longer-term economic outlook.”

Read also: Rand in biggest slide since 2015

Packirisamy says seems obvious that the President has used this cabinet reshuffle to surround him with personal loyalists within cabinet, while getting rid of those that have been seen as opposing him previously. “It remains to be seen how the African National Congress (ANC) as a party will respond to these moves.”

Meanwhile, relatively unknown Forum 4 Service Delivery has rejected Zuma’s “factional” axing of ministers and deputy ministers, as well as Gigaba’s appointment. The National Freedom Party has called the move an early April Fool’s Day joke, and the Congress of South African Trade unions says the shuffle is a waste of time, money and state resources. “Zuma has sold out this country very cheap and compromised quality with quantity,” the federation notes.

The Save South Africa campaign has called on South Africans to protest outside National Treasury at 10am on Friday, and Kallie Kriel, CEO of AfriForum, says Gordhan’s sacing is a “disgrace”.“The whole country is harmed and faces downgrading by grading agencies – all to serve the interests of one man, Jacob Zuma.”

Cabinet changes:

Department

Minister

Deputy Minister

Energy

Mmamoloko “Nkhensani” Kubayi

-

Transport

Joe Maswanganyi

-

Finance

Malusi Gigaba

Sifiso Buthelezi

Police

Fikile Mbalula

Mr Bongani Mkongi

Public Works

Nathi Nhleko

-

Sports and Recreation

Thembelani Nxesi

-

Tourism

Tokozile Xasa

Elizabeth Thabethe

Public Service and Administration

Faith Muthambi

Dipuo Letsatsi-Duba

Home Affairs

Prof Hlengiwe Mkhize

-

Communications

Ayanda Dlodlo

Thandi Mahambehlala

Public Enterprises

-

Ben Martins

Arts and Culture

-

Maggie Sotyu

Trade and Industry

-

Gratitude Magwanishe

Telecommunications and Postal Services

-

Stella Ndabeni-Abrahams

Small Business Development

-

Ms Nomathemba November

Source: MMI

 

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