Gordhan axing a severe blow for economy - CEOs

Cape Town - The CEO Initiative, formed in 2016 to help put South Africa’s economy back on a growth trajectory and stave off credit rating downgrades, added its voice to a number of parties who expressed grave concern following President Jacob Zuma’s overnight cabinet reshuffle. 

Zuma axed a number of ministers and deputy ministers at midnight on Friday – most notably Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas. 

He replaced the leaders at National Treasury with former home affairs minister Malusi Gigaba as finance minister and Sfiso Buthelezi, a former businessman and ANC MP, as his deputy.

READ: Gigaba deployed to Treasury for Guptas - Save SA 

“The CEO initiative is gravely concerned and disappointed by the ill-timed and irrational dismissal of a trusted and well-respected Minister of Finance and Deputy Finance Minister,” the group, led by Telkom chairperson Jabu Mabuza, said in a statement issued on Friday morning.

“This decision, and the manner in which it was taken, is likely to cause severe damage to an economy that is in dire need of growth and jobs. The rationale for the removal of other ministers in key departments at a time when the country is beginning to make progress on a number of fronts is also questionable.”

The grouping further called on Gigaba as the new finance minister, the government as a whole, and the ruling party to ensure that the country is not further harmed by “capricious executive decisions” and that South Africa’s fiscal management remains as strong as ever in support of the South African competitive national advantage.

Unnecessary instability

Speculation about the finance minister's fate - rife since the start of this week – together with this morning's announcement have created unnecessary instability at one of the country’s key institutions and caused immense uncertainty among international investors, the statement read. 

“South Africa is an emerging economy in a global community and in need of capital from all corners of the world. If investors lose faith and trust in our economy, all citizens – not just big business – pay the price for this, in the form of higher inflation, decreased buying power as well as decimated savings, pensions and investments. A lack of investment also means that growth – and much-needed job-creation – will be stifled.” 

READ: Open attack on Treasury as Zuma loyalists take control - economist 

The CEO Initiative, founded more than a year ago, was formed as part of a concerted effort at the request of President Jacob Zuma, Deputy President Cyril Ramaphosa and the South African government as a whole to achieve inclusive and sustainable growth, for the benefit of all who live in South Africa. 

In an unprecedented show of cooperation, government, business and labour joined forces to sell South Africa as an investment destination to the international community and appease rating agencies which have threatened to downgrade South Africa’s sovereign credit rating to junk status. 
Progress derailed 

The CEO Initiative said in its statement that it maintains the collaborative effort between business, government and labour is the most responsible and sustainable way of achieving true economic transformation. 

“The dismissal of Pravin Gordhan as Minister of Finance and his deputy creates a high risk of derailing any progress that has been achieved in this regard and will deal a serious blow to the economy at a time when the country can ill afford this.

“Commitment to fiscal discipline is of the utmost importance if we are to protect the economy from outside shocks and maintain an investment grade credit rating.”

It further said the role that the National Treasury plays in maintaining investor confidence in South Africa should not be underestimated. 

Finance ministry’s integrity lauded 

“Pravin Gordhan and Mcebisi Jonas have always acted with the utmost integrity in their relations with business, while continuously challenging our approach to economic transformation and inclusive growth, in a manner that was entirely consistent with the Constitution and policies of the ruling party.” 

READ: The 81 CEOs who pledged support for Gordhan 

The combined efforts from government, labour and business have resulted in a vastly improved outlook for the economy compared to a year ago, the grouping said. It listed the progress made in the past year, such as: 

  • the risk of a downgrade to sub-investment grade has significantly reduced. A healthy and stable credit rating forms the basis of creating an environment in which growth can thrive, as it attracts investors and ensures the country can borrow at an affordable rate.
  • government, labour and business have made progress on various initiatives to support growth in the economy. This includes the establishment of a R1.5bn SME Fund to invest in small and medium-sized businesses and a Youth Unemployment Scheme aimed at providing employment opportunities to one million young people over a period of three years. 

“All three major rating agencies have acknowledged the combined efforts from government, labour and business in their year-end assessments in 2016, as South Africa maintained its investment grade sovereign ratings. However, the country still has to implement a significant number of reforms in order to create inclusive and sustainable growth that is necessary for true economic transformation,” the grouping said. 

‘Be responsible and heed the future’ 

National Treasury has shown great courage in taking difficult decisions to safeguard the credibility of the country’s finances, while paying heed to social challenges including the university funding crisis and welfare spending. Rating agencies and global investors have lauded South Africa’s efforts in this regard and the importance of continued rigour cannot be emphasised enough, the CEO Initiative added. 

READ: Cabinet reshuffle risks damaging SA's fiscal discipline 

“South Africa is well on its way to fulfilling its developmental mandate and creating a more equitable distribution of income by working towards the goals of the National Development Plan, but this has to be done in a disciplined and responsible manner – not by spending excessively on the short term with little regard for the future. 

“It is of the utmost importance to all South Africans that the integrity and capacity of the National Treasury be maintained,” it concluded. 

Read Fin24's top stories trending on Twitter:

Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Yes. We need the money.
11% - 836 votes
It depends on how the funds are used.
74% - 5553 votes
No. We should have gotten the loan elsewhere.
15% - 1111 votes