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:
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Department
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Minister
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Deputy
Minister
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Energy
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Mmamoloko
“Nkhensani” Kubayi
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Transport
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Joe
Maswanganyi
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Finance
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Malusi
Gigaba
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Sifiso
Buthelezi
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Police
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Fikile
Mbalula
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Mr
Bongani Mkongi
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Public
Works
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Nathi
Nhleko
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Sports
and Recreation
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Thembelani
Nxesi
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Tourism
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Tokozile
Xasa
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Elizabeth
Thabethe
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Public
Service and Administration
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Faith
Muthambi
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Dipuo
Letsatsi-Duba
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Home
Affairs
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Prof
Hlengiwe Mkhize
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Communications
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height:14.85pt">
Ayanda
Dlodlo
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Thandi
Mahambehlala
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Public
Enterprises
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height:14.85pt">
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Ben
Martins
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Arts
and Culture
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Maggie
Sotyu
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Trade
and Industry
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Gratitude
Magwanishe
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Telecommunications
and Postal Services
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Stella
Ndabeni-Abrahams
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Small
Business Development
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Ms
Nomathemba November
Source: MMI
BUSINESS REPORT
ONLINE