South Africa’s reputation battered as finance minister is fired

South African finance minister, Pravin Gordhan, lost his job. Markets are showing their displeasure, with both the rand and banks plunging. That’s because South Africa was already on the cusp of a potential downgrade by rating agencies. Here's the latest.

Johannesburg stock exchange, South Africa
Source: Bloomberg

Rumours have been confirmed as finance minister Pravin Gordhan was sacked from his role, along with his deputy minister, Mcebisi Jonas. The new finance minister is Malusi Gigaba.

Who is Malusi Gigaba?

In short, he is a former Minister of Home Affairs, who holds a Bachelor’s degree in education and a Master of Arts degree in social policy.

How are these qualifications and experience relevant to running South Africa’s treasury?

They are not. The Economic Freedom Front (EFF) took to Twitter to say the new minister’s ‘only qualification is loyalty to the Guptas.’ The Gupta family have been implicated by the public protector as having captured the state through the president to serve their own business agendas. President Jacob Zuma has made the change in treasury on his ‘own accord’ and does not have the support of the deputy president, the secretary general, Cosatu (the African National Congress [ANC] ruling party’s labour union ally) or the South African Communist Party (also an ally of the ANC). This creates further suspicion that the president is aligning the treasury with his own business agendas.

Markets tell the story

South Africa’s economy is in a fragile state and the country is trying to appease rating agencies and avert a sub-investment ratings downgrade. The new finance minister is a rookie with a formidable task. His appointment has created instability and uncertainty in relation to South Africa’s economic future, reflected in a sharp surge in bond yields and the weakening of the rand, escalating the cost of borrowing and financing for South Africa. Local banking stocks are also being hit, with most having given up more than 4% on their first opportunity to react to the cabinet shift. Locally-listed gold stocks are benefiting from the currency depreciation and are the best-performing stocks on the Johannesburg Stock Exchange (JSE).

What next?

The leading opposition party, the Democratic Alliance (DA), has filed a vote of no confidence in the president that should be put to a parliamentary vote by early May. Fellow opposition parties have suggested their support on the matter, although they will need a further 50 (of 249) votes from the ANC ruling party to oust Zuma. While this is possible, as the ANC is currently in a state of divide, it still appears unlikely.

The EFF has also started proceedings with the constitutional court in an attempt to try get the president impeached for ‘lying to parliament on numerous occasions.’

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