The rand recovered almost 80c to the US dollar yesterday evening following the appointment of former finance minister Pravin Gordhan in his old post. The move follows the the shock axing of Nhlanhla Nene last week and the broad fallout on South African markets. Gordhan was appointed as the new finance minister in an about turn just four days after David van Rooyen took over from Nene.
The rand recovered to ZAR 15.09/US$ from ZAR 15.89 immediately after the news broke late on Sunday, after the unit briefly breached ZAR16/US$ in nervous trade on Friday. The Presidency announced in a statement on Sunday night that Gordhan and Van Rooyen will be switching portfolios. President Jacob Zuma said that he made the change following several representations to reconsider his decision. ”As a democratic government, we emphasise the importance of listening to the people and to respond to their views.” Although this statement is a joke coming from him, we at löeast could sigh with relief when he further stated that “I have appointed Mr Pravin Gordhan, the current Minister of Cooperative Governance and Traditional Affairs as the new Minister of Finance.”
Zuma highlighted 6 areas in which Gordhan will lead government again:
* Ensuring an even stronger alignment between the Budget and the Medium Term Strategic Framework (MTSF) in the interest of stimulating more inclusive growth and accelerated job creation while continuing the work of ensuring that our debt is stabilised over the medium term.
* Promoting and strengthening the fiscal discipline and prudence that has characterised our management of public finances since the dawn of freedom.
* Working with the financial sector so that its stability is preserved under the broad umbrella of the Twin Peaks reform.
* Ensuring that the National Treasury is more acceptable to all sections of our society.
* Adherence to the set expenditure ceiling while maintaining a stable trajectory of our debt portfolio, as set out in the February 2015 Budget.
“I have also decided to appoint the current Minister of Finance, Mr David van Rooyen, as the new Minister of Cooperative Governance and Traditional Affairs,” stated Zuma. Well, that is still wrong but at least van Rooyen will not be able to do much damage here before the Traditional Leaders lift their Assegaais and “assist” him with course corrections!
JSE CEO Nicky Newton-King warned yesterday in a statement that the rand rout would hit South Africa hard. “Continued currency depreciation will have a profound impact on fuel prices and on inflation overall, which will hurt companies, small businesses, and individuals,” she cautioned. “This will put pressure on the ability of people to fund their health and housing requirements, their household budgets, their children’s education and their entrepreneurial aspirations.”
Gordhan’s appointment will also put to bed speculation that South Africa will veer off from its cost saving policy, that Treasury is easily influenced by political agendas, including that it will budge and approve a controversial renegotiation of SAA’s Airbus deal. The Airbus swap deal has largely been rumoured to be the reason for Nene’s recalling despite government saying that he has been earmarked to head the BRICS Bank’s African centre based in Johannesburg.