Gigaba addresses ratings agency concerns

Incoming finance minister Malusi Gigaba has begun the work of allaying concerns about South Africa’s economic future.

The newly appointed minister held teleconferences with international rating agencies on Friday afternoon “to give assurances about the future”.

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Gigaba met with Treasury Director General Lungisa Fuzile and the department’s executive committee on Friday.

“He has been briefed on pertinent and most urgent issues‚” the finance ministry said in a statement.

Gigaba is expected to address the media at 11am on Saturday and is expected to touch on concerns over ratings agency downgrades following President Jacob Zuma’s late night cabinet reshuffle.

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On Friday the rand took a beating – it was 0.81% weaker at R13.3723 to the dollar in late afternoon trade.

However analysts noted that it was performing in a more stable manner when compared to the period that immediately followed the axing of Nhlanhla Nene in December 2015.

Capital Economics economist John Ashbourne said the damage for the economy’s near-term prospects may be smaller than some feared.

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“While the rand was 8% lower against the dollar over the week‚ its strong performance in recent months were such that it was still up 2% since the start of the year‚” he said‚ adding that the country’s narrowing current account deficit would help cushion the economy from external shocks.

North West University economics professor Raymond Parsons said the cabinet reshuffle which saw Gigaba replace Gordhan would have a “very negative impact on markets and investor confidence”.

“Policy uncertainty has inevitably risen and this is not helpful for encouraging the private fixed investment that SA needs to grow more rapidly‚” he said.

Parsons said Gigaba would have a “steep learning curve” because he has “no obvious previous background in finance‚ economics or business”.

“Minister Gigaba will have big shoes to fill in taking over from Pravin Gordhan. Gordhan had come to enjoy the confidence of many key stakeholders in the economy and abroad and – together with business and labour – was instrumental in fending off junk status for SA‚” he said.

Parsons Gigiba would have to repair damaged trust and continue to successfully mobilise a collaborative effort.

Meanwhile some in the business community are concerned about the implications of the reshuffle.

The SA Chamber of Commerce and Industry on Friday said that while the president had the prerogative to choose his cabinet‚ “we as business strongly believe that some measure of prudence is exercised to avoid the subsequent knock-on effect such decisions are likely to have on the economy of our country”.

“On the political front it is our call as a business formation that there be cooperative partnership in managing sensitivities that may adversely impact our risk profile in international markets‚” the chamber said.

“South Africa needs a stable and conducive climate for economic growth for us to be a preferred investment destination‚” it said.

- Additional reporting Maarten Mittner‚ TimesLIVE