Following a directive from the President Jacob Zuma, Finance Minister Pravin Gordhan and National Treasury Director General Lungisa Fuzile are preparing to return tonight from the UK and are expected to arrive in South Africa tomorrow morning, a Treasury statement revealed. The rand which was at a 2015 high this morning tumbled more than 2 per cent against the dollar to 12.75 following the news of the president’s directive.
Reports suggest that President Jacob Zuma may reshuffle his cabinet including Gordhan. Zuma recalled Gordhan, his Deputy Mcebisi Jonas and Director-General Lungisa Fuzile from their overseas trip this morning. The three together with key National Treasury officials, business and labour were on a non-deal international investor roadshow. The delegation was due to spend two days in London (27 – 28 March), one day in Boston (29 March) and two days in New York (30-31 March). This follows extensive engagements by senior National Treasury officials with domestic investors following the tabling of the 2017 Budget.
According to Treasury, Mcebisi Jonas who was scheduled to undertake the United States leg of the trip will no longer be leaving tonight as planned in line with the President’s directive.
Business Leadership South Africa in a statement said the President’s announcement directive is “ill advised”.
Adding that “The Finance Ministry, alongside business and labour who are accompanying the National Treasury on this roadshow, have worked hard to maintain South Africa’s investment grade credit rating. The damage to investor sentiment to South Africa as a result of the President’s decision should not be underestimated. Coming in the middle of meetings where business and the National Treasury have been making the case for South Africa, this action has pulled the rug from under our feet, as demonstrated by the rand sharply reversing its strongest growth trend in two years. At a time when investors need stability, certainty, and evidence of progress, this action sends exactly the opposite message.
“Business calls for cool heads and sound leadership to prevail in the context of certain damage to the economy should decisions be made which cause institutional instability, and associated negative impact on asset prices as seen in the collapse of confidence, currency and equity prices following Nenegate in December 2015. The sovereign credit rating agencies have continuously communicated that institutional stability is one of the central pillars on which their investment grade rating for South Africa rests, and any undermining of such strength puts this rating and the cost of capital at risk.
“The consequences of uncertainty and a downgrade include diminishing the ability of our country to remain economically stable, finance its debt, and support the government spending on which so many South Africans depend”.
The body said it was calling on South Africa’s “political leadership to exercise the greatest due diligence and put the economic welfare of the country first”.
Zuma’s directive comes a day before the North Gauteng High Court is due to hear reasons for why a declaratory order should be issued as to whether Gordhan can order the country’s big-four banks to keep doing business with the politically-connected Gupta family, whose accounts were closed following alleged suspicious transactions.
— Pauli Van Wyk (@PaulivW) March 27, 2017