Banks surge on Gordhan

Johannesburg - South Africa’s banking index rose the most in 14 years after President Jacob Zuma reappointed Pravin Gordhan as finance minister, reversing a decision to give the post to a little-known lawmaker.

The six-member FTSE/JSE Africa Banks Index climbed as much as 17 percent in Johannesburg, the biggest jump since September 2001 and recovering much of the 19 percent two-day plunge after Zuma fired Nhlanhla Nene as finance minister on December 9 and replaced him with David van Rooyen. Life assurers also gained, climbing as much as 15 percent. Barclays Africa Group rose as much as 21 percent and FirstRand surged as much as 22 percent, while insurer Sanlam soared as much as 23 percent.

The logos of three of South Africa's four biggest banks - Absa, Standard Bank and First National Bank - adorn buildings in Cape Town. Picture: Mike Hutchings, Reuters. Credit: REUTERS

“Markets have reacted strongly to political machinations, resulting in the much needed u-turn that has led to the hasty appointment of a credible finance minister,” Lesiba Mothata, chief economist at asset manager Investment Solutions, said in an e-mailed statement. Gordhan, 66, who was finance minister from 2009 until May 2014, will hold a press conference at 1 p.m. Monday in Pretoria, the finance ministry said.

Last week’s shock removal of Nene wiped R155 billion ($10 billion) off the value of the banks index, while the rand fell to record lows against the dollar and the pound. A weakening rand is likely to fuel inflation, increasing the prospects that the central bank could raise interest rates and add to the strains on already indebted South African consumers.

“The Banking Association South Africa commends President Zuma for listening to the public and recognising the impact of removing Minister Nene,” the Johannesburg-based organisation said in an e-mailed statement. “The re-appointment of Pravin Gordhan is very welcome. “We call on Minister Gordhan to move speedily to rebuild confidence and assure investors that we will continue on the path of fiscal discipline, certainty, consistency and promotion of an environment for job-creating investment.”