Gordhan: All-out bid to calm investors.

Reuters
Pretoria


New Finance Minister Pravin Gordhan acted swiftly to calm South Africa investors yesterday, 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 industrialised economy its third finance minister in less than a week.
Fallout from the sacking last Wednesday of Nhlanhla Nene in favour 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 yesterday: “We take account of the concerns of the rating agencies and investors and we shall endeavour to protect the investment grade rating of South Africa.”
Credit agency Fitch downgraded South Africa on December 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”.
Yesterday, the rand had strengthened by 5.07% against the dollar to 15.0850, recouping some losses suffered last week and putting it on course towards 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.
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.
But Reserve Bank Governor Lesetja Kganyago said there were no plans for a special session because South African capital markets were deep enough to withstand shocks of this magnitude.
Yields on government bonds recovered sharply in early trade yesterday, with the benchmark paper due in 2026 down 107 basis points at 9.31%.
The banking index shot up 13% in afternoon deals, erasing most losses sustained last week, and the broader market seesawed in and out of the red during the session.
“The markets will welcome back Gordhan to National Treasury. He is a known entity, is his own man and did well when in the post previously,” Rand Merchant Bank currency strategist John Cairns said. “But it is certainly unreasonable to expect all of last week’s losses to be reversed - a huge amount of uncertainty has been created in the past few days.”
Gordhan also said his office would ensure that South Africa stuck to fiscal prudence including on any deals relating building of nuclear power stations.