The South African Finance Minister fiasco has international investors on edge. A week prior to Nhlanhla Nene’s shock departure, credit ratings agency Fitch downgraded the country’s sovereign debt to one notch above ‘junk’ status while S&P, already on BBB-, downgraded the outlook to negative. The appointment of former FInMin Pravin Gordhan has allied some of those fears but the damage seems to have been done. President Jacob Zuma’s first choice replacement David van Rooyen lasted a mere four days, before Zuma was forced to revert to Gordhan, after a national outcry. Well-known economist Peter Attard Montalto offers international eyes on the matter, sitting in London, and his concerns following the recent shenanigans is that nothing’s really changed. Montalto says hard decisions need to be made as nothing has been said yet that’ll save South Africa from junk. – Stuart Lowman
By Fadia Salie
Cape Town – The ANC’s National Working Committee (NWC) gave no recognition of the damage done from the flip-flopping of finance ministers in the past few days and nothing to save South Africa from junk status, said emerging markets economist Peter Attard Montalto.
Earlier this month, ratings agency S&P downgraded South Africa’s outlook to negative, while Fitch downgraded the credit rating to BBB- from BBB. This rating is only one notch above “junk” status and in-line with S&P’s rating, although S&P have a negative outlook on the rating, while Fitch have a stable outlook.
There was no recall of President Jacob Zuma, a disappointment for locals expecting anything more dramatic and pushing recall rumours beforehand, he said.
The fact that nothing new on growth or policy was forthcoming is “negative and a disappointment for the market”.
Overall this press conference is a master class in how the ANC can play the media and define their own narrative, said Montalto.
He said following Monday’s NWC meeting a recall was discussed around the edges as well as how to allow Zuma a ‘safe’ option to resign, but Zuma held the course with a majority of people in the expanded NWC behind him.
“The ANC’s internally balancing mechanism has worked around NT leadership but not around finding new ANC leadership (or wider economic leadership).”
Montalto expressed surprise at the ANC’s attempt to put forward Van Rooyen’s abrupt appointment as a “deliberate and well thought out choice” and that of Nene for Brics Development Bank candidate.
“We still believe that Nene was fired after the Wednesday cabinet meeting on his views on fiscal, nuclear and parastatals.
“Additionally it makes no sense that they would think the market would react only in a minor way to someone totally unqualified taking the job. This doesn’t add up and shows the lack of understanding of markets and investors.”
Last week, Zuma shocked the markets and nation when he announced that he had fired Nhlanhla Nene as finance minister and replaced him with the relatively unknown David van Rooyen.
Minister in the Presidency Jeff Radebe revealed that not even the cabinet was informed of Zuma’s decision.
Montalto now touted a recall or a managed exit of Zuma only for after the May elections next year, “assuming no ‘mass’ uprising, particularly of the black working classes”.
“And even then we would conclude it is difficult to see [a] recall without previous supporters changing their minds,” he said.
The rand, which strengthened to R14.86/$ just before lunchtime, was trading at R15 shortly after the press briefing.
This is over 100c firmer from the record low of R16.05/$ reached after the news of Nene’s axing.