ZUMA . FINANCE MINISTERS
Zuma and his finance ministers

South African President Jacob Zuma has redeployed Finance Minister, David Van Rooyen just four days after his appointment. Zuma gave the sensitive portfolio back to former finance minister, Pravin Gordhan, who himself was redeployed last year after about five years on the job.

Highlights

  • Zuma’s replacement of immediate past finance minister, Nhlahla Nene with Van Rooyen on December 9, 2015 met with widespread criticism
  • The capital market reacted negatively as stocks crashed and the currency (the Rand) took a knock
  • Zuma, 73, initially gave no reason for removing Nene
  • His capitulation raises questions about Zuma’s standing within the African National Congress and his fitness to continue in office

Details

South African President Jacob Zuma named his second finance minister in four days on Sunday, reappointing Pravin Gordhan, following market turmoil that sent the rand to record lows and bond yields to the highest in seven years.

Zuma sparked outrage and an investor exodus on Dec. 9, when he fired Nhlanhla Nene, who had held the post for about 18 months, and replaced him with a little-known lawmaker, David van Rooyen.

The announcement caused the rand to free fall and led to major losses at the Johannesburg Stock Exchange.

Zuma said on Sunday night that “after receiving many representations to reconsider my decision, Van Rooyen will instead head the cooperative governance ministry, under which local governments fall. The rand surged more than 5 percent on the news.

Gordhan will ensure “adherence to the set expenditure ceiling while maintaining a stable trajectory of our debt portfolio, as set out in the February 2015 budget,” Zuma said in a statement.

Reactions

The about-turn  raises questions about Zuma’s standing within the African National Congress.

“It may well have been the case that an unprecedented amount of criticism from within the ANC, as well as the gravity of the financial market sell-off, forced a re-think from President Zuma,” Razia Khan, head of Africa economic research at Standard Chartered Plc in London, told Bloomberg by e-mail on Sunday. “Markets will welcome this news, with a strong likelihood that South African assets will rally. However, further reassurances will likely be needed for any deeper, sustained rally in South African markets.”

Judith February of the Institute for Security Studies believes Zuma’s actions do not go well with good governance. “I think he didn’t realize or understand fully the consequences of his action. You have a president who seems to believe that he is above his people,” she said. 

Market reaction

The rand rallied to 14.9420 per dollar before paring gains to 15.3272 by 00:44 a.m. in Johannesburg on Monday. It was at 15.8952 against the U.S. currency on Dec. 11.

RAND SURGE

Johannesburg’s stock market had posted its worst week in a year, with 170 billion rand ($10.7 billion) wiped off the value of equities in two days after Nene’s firing, according to exchange operator, JSE Ltd.

Zuma, 73, initially gave no reason for removing Nene. The Minister in the Presidency, Jeff Radebe, said other cabinet members weren’t informed of the president’s plans. After widespread criticism, Zuma announced on Dec. 11 that Nene would be nominated as the head of the African regional center of the Brics New Development Bank. He added that there was no obligation to tell anyone about his choices for the cabinet.

The president then issued a series of statements after market volatility following Nene’s ouster, from pledging fiscal prudence to denials of an affair with the chairwoman of South African Airways, the state-owned national carrier.

Calls for resignation

“This is positive in the sense that it shows Zuma’s power is more constrained than his actions last week suggested,” Peter Attard Montalto, an analyst at Nomura International Plc, said by text message on Sunday. “But it is also very damaging to him and one must increase the probability that he is recalled now.”

Chief Economist at Econometrix, Dr Azar Jammine, told eNCA that Zuma had no alternative as there was no confidence in his appointment of David van Rooyen as finance minister and van Rooyen, “whether he was competent or not, would have carried the stigma of being President Zuma’s lackey”

Jammine said although Gordhan is well respected for his proven track record on fiscal discipline, a lot of damage has already been done. He believes Zuma is “actually making a fool of himself at this moment.”

“I don’t think you will see confidence fully restored until we see a change of leadership in the country. The biggest exuberance would be if the president were to resign. Then we would see a turnaround in the fortunes of the economy,” Jammine said.

 Dawie Roodt, chief economist at Pretoria-based Efficient Group Ltd., shares similar sentiment. Roodt said by phone on Sunday, “This is not about Gordhan or Van Rooyen or Nene, it’s about Zuma. I can’t see how Zuma can politically survive much longer under these circumstances.”

Gordhan will be sworn in at 10 a.m. on Monday in the capital, Pretoria while South Africa’s economic cluster in cabinet will meet on Tuesday to prepare for a special meeting on the economy on Dec. 18.

 

Profiles
PRAVIN GORDHAN
Pravin Gordhan
Pravin Gordhan

Gordhan, 66, was finance minister from 2009 to May 2014, when he was moved to the cooperative governance ministry and replaced by Nene, who was then his deputy. Gordhan steered the economy through the first recession in 17 years, while fending off pressure from labor unions to increase spending.

He was previously the Commissioner of the South African Revenue Service from 1999 to 2009. Between 1991 and 1994, he chaired the Convention for a Democratic South Africa. He was also co-chairman of the Transitional Executive Council which oversaw the transition to the first democratically elected government.

VAN ROOYEN
David van Rooyen
David van Rooyen

David van Rooyen has an anti-apartheid struggle history. He began his career in politics in the mid-1980s as an MK operative and soldier. He held positions in the Congress of South African Students and in the Khutsong Student Congress, served as a United Democratic Front representative and was a member of the National Union of Mineworkers.

He is a former executive mayor of Merafong Municipality and a former North West provincial chairperson of the South African Local Government Association.

From 1994-1997 he was an ANC branch leader, then an ANC regional leader until 2007 and a provincial leader in the party until 2009. He was also a branch leader of the ANC Youth League between 1994 and 1996 and a regional leader in the league between 1996 and 2003.

Van Rooyen holds a number of qualifications, including an advanced Business Management Diploma, a Diploma in Municipal Governance and a Masters Degree in Public Development and Management. He recently acquired a certificate in investment analysis and portfolio management from UNISA and The University of London conferred an MSc Finance (Economic Policy) on Van Rooyen on July 30, 2014.

The surprising appointment of Van Rooyen followed less than a week after Fitch Ratings Ltd. downgraded the country’s debt to BBB-, the lowest investment-grade level, and Standard and Poor’s lowered its outlook to negative, putting Africa’s most-industrialized nation at risk of relegation.

 

NHLAHLA NENE
Nhlahla Nene
Nhlahla Nene

Nhlanhla Musa Nene (born 5 December 1958) is the former Minister of Finance of South Africa, appointed on 25 May 2014 and removed by President on 9 December 2015.

He was previously the deputy minister of finance in the Cabinet of South Africa from November 2008 to May 2014, and a chairperson of the South African Finance Portfolio Committee.

He has been an ANC member of parliament since 1999.  He is considered the first Black South African to hold the office of Finance Minister.

 

NP/Bloomberg/eNCA/Wikipedia

 

 

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