Open attack on Treasury as Zuma loyalists take control – economist

Incoming Finance Minister Malusi Gigaba. (Gallo Images)
Incoming Finance Minister Malusi Gigaba. (Gallo Images)

Cape Town – The appointment of two politicians, who are seen as close to President Jacob Zuma, is an open attack on Treasury, according to Nomura emerging market economist Peter Montalto.

Zuma fired Finance Minister Pravin Gordhan and Deputy Finance Minister Mcebisi Jonas at midnight on Thursday, replacing them respectively with Home Affairs Minister Malusi Gigaba and ANC MP Sfiso Buthelezi.

This was part of a broader cabinet reshuffle.

Gigaba, South Africa's fourth finance minister in two years, will have a few days before the next ratings agency decision (Moody's) is due.

“The market will struggle to digest Gigaba,” said Montalto. “Someone who has been effective at Home Affairs, but is clearly being put in a role to do a particular job by Zuma and viewed as loyal to Zuma. Similarly with Buthelezi.”

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“I view this as an open attack on Treasury to replace people who are anti-corruption with people loyal to Zuma to help the Zuma faction win in December.

“This is an attack on the institution of National Treasury and as such will trigger multiple downgrades.

“As we've highlighted before, whilst there are some fiscal risks we are more worried about National Treasury’s role in procurement, preventing corruption and oversight of state owned entities including nuclear and banking.

“We think this is bad for the market and for South Africa,” he said. “Equally there are questions hanging over Buthelezi around his role at Prasa (he was its former chairperson) and the links of both to various others such as the Guptas.

“This will concern the market and I think the market will be worried by these appointments.

“We must also consider the growth shock here like after Nene-gate (when former Finance Minister Nhlanhla Nene was fired on 9 December 2015) is going to make things harder on the fiscal side with difficult choices on revenues and probably a decision to debt finance instead.

“This will reinforce the need for ratings downgrades. But as we said above fiscal will not be the main focus but procurement etc.”

DA shadow minister of finance David Maynier said the appointment of Gigaba means that National Treasury is now firmly under the political control of Zuma.

Echoing Montalto's views Maynier said the new finance minister has extensive experience in the national executive, but he has absolutely no experience in the “finance family”, and his appointment is unlikely to be well received by the markets,

He said the new finance minister’s principle qualification for the job is his absolute loyalty to Zuma.

"Gigaba appears to have been a compromise choice and his main positive is that he is not Brian Molefe.”

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