South African Finance Minister soothes worries

December 14, 2015 10:33 AM

New Finance Minister Pravin Gordhan acted swiftly to calm South Africa investors on Monday, saying he would strive to keep Pretoria's investment grade rating after days of market turmoil that have triggered calls for President Jacob Zuma to step down.

Zuma appointed the widely respected Gordhan late on Sunday, his second stint in the job, in a dramatic U-turn that gave Africa's most industrialized economy its third finance minister in less than a week.

Fallout from the sacking last Wednesday of Nhlanhla Nene in favor of relatively unknown and untested David van Rooyen has also clouded the political reputation and future of Zuma, 73, within the his African National Congress party.

His initial appointment of van Rooyen, a Zuma loyalist in parliament, touched off a critical storm and selling frenzy in the rand currency, stock and bond markets.

Seeking to reassure markets, Gordhan told a televised news conference on Monday: "We take account of the concerns of the rating agencies and investors and we shall endeavor to protect the investment grade rating of South Africa."

Credit agency Fitch downgraded South Africa on Dec. 4, leaving the continent's most sophisticated economy just one notch above "junk" status, and said on Thursday the dismissal of Nene had "raised more negative than positive questions".

By 1216 GMT on Monday, the rand had strengthened by 5.07% against the dollar to 15.0850, recouping some losses suffered last week and putting it on course toward its biggest daily percentage rise since 2008. The rand had traded at 14.4320 per dollar before Nene was fired.

South Africa is girding for local elections next year in which the ANC will face stiff competition from the opposition Democratic Alliance in urban areas, including the economic hub of Johannesburg. The countryside remains an ANC stronghold.

Even some supporters of the ANC, Nelson Mandela's erstwhile liberation movement that has ruled since the end of apartheid in 1994, expressed dismay about Wednesday's appointment of a Zuma loyalist to the crucial finance post.

They also described the return to the ministry of Gordhan, who also held the job from 2009 to 2014, as a sign Zuma was losing his grip. "It may not be his death knell, but it's certainly the turning of the tide," said Ben Turok, a former senior ANC legislator and anti-apartheid activist.

Markets Cheer Gordhan

The rand fell nearly 9% last week following the removal of Nene, a civil service veteran keen to rein in government spending, leading to vague talk the South African central bank might call an emergency monetary meeting.

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