Gordhan moves to avert next ‘Nene’ crisis at Treasury

Nastional Treasury director general Lungisa Fuzile. (Supplied)
Nastional Treasury director general Lungisa Fuzile. (Supplied)

Johannesburg - The government is in the process of extending National Treasury head Lungisa Fuzile’s term, a decision that may settle investor concerns over the management of the country’s finances, according to two people with knowledge of the matter.

In the coming weeks, the cabinet will sign off on Finance Minister Pravin Gordhan’s recommendation that Fuzile’s five-year term be extended beyond its May 15 end, the people said. They asked not to be identified because the information isn’t public yet.

“Market preference would be for him to stay because he is very market-friendly and very astute within his role,” Gina Schoeman, an economist at Citigroup in Johannesburg, said by phone on Thursday. “He does a good job. We would be surprised if it wasn’t renewed."

“At this stage where we are facing a possible downgrade to junk status, this is exactly what we need,” Isaac Matshego, an economist at Nedbank, said by phone on Thursday. “You must take into account that market players and these rating agencies are quite familiar with Mr. Fuzile and he is familiar with them too. He knows what they need and how to appease them.”

Investors have sought signs of stability since President Jacob Zuma roiled markets in December by replacing the respected Nhlanhla Nene as finance minister with a little-known lawmaker. The president reappointed Pravin Gordhan four days later to the position that he held from 2009 until 2014, after pressure from political and business leaders.

In the two days after Nene was replaced, the Johannesburg Stock Exchange lost R170bn ($11.8bn) and bonds and the rand plummeted, making the currency the third-worst performer in 2015 among 24 emerging markets tracked by Bloomberg.

Still, an ongoing spat between Gordhan and the commissioner of the South African Revenue Services Tom Monyane, as well as concerns over continuity, are adding to unease.

Investor respect

Fuzile has won respect from economists and investors as he’s implemented a spending ceiling and steered South Africa’s budget during a period in which the rand has halved in value against the dollar and its sovereign credit-rating was downgraded to the brink of junk status.

The finance ministry will make an announcement “as soon as we’re finished on government processes”, it said in emailed response to questions on April 21.

“It’s a cabinet thing so cabinet is the only one that can speak on it,” Treasury spokesperson Phumza Macanda said by phone on Thursday.

Fuzile declined to comment on April 19. He didn’t immediately respond to phone calls and a text message seeking comment on Thursday.

The cabinet next meets on May 11, government spokesperson Phumla Williams said by phone, adding that she is unaware of the agenda.

Fuzile is leading a process to determine how much Zuma must repay for non-security upgrades at his private home after the Constitutional Court ruled last week that the president violated the constitution by failing to comply with an order of the graft ombudsman to pay back taxpayer funds. The determination has to be made by the end of May.

Fuzile, a former teacher, took control of the Treasury from Lesetja Kganyago in May 2011 as Africa’s most-industrialised economy struggled to recover from the global financial crisis. He has overseen the implementation of a spending ceiling and had to steer the nation’s finances during a period in which the rand lost more than 50% of its value against the dollar and South Africa’s credit-rating was downgraded to the brink of junk status.

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