Home News S.Africa seeks to repair damage after finance fiasco

S.Africa seeks to repair damage after finance fiasco

Published on 14/12/2015

South Africa's new Finance Minister Pravin Gordhan vowed Monday to stabilise the economy after his predecessor lasted just four days in the job in a political drama that highlighted the country's mounting woes.

The tumult since last week triggered a collapse in the rand as investors pulled out of the country, which is beset by high unemployment, slow growth and accusations of worsening government corruption.

President Jacob Zuma has been engulfed by criticism after firing respected finance minister Nhlanhla Nene in favour of little-known backbencher David van Rooyen, who was himself sacked on Sunday.

The dramatic U-turn focused attention on Zuma’s standing within the African National Congress (ANC) party, which has ruled since the end of apartheid in 1994 but has been losing public support.

“We will stay the course of sound fiscal management,” Gordhan told reporters in a message designed to reassure unnerved South Africans and foreign investors.

“Our expenditure ceiling is sacrosanct… We are not going to make reckless decisions.”

Gordhan, who served as finance minister from 2009 to 2014, was re-appointed late on Sunday after the rand fell to an all-time low of 16 to the dollar when Nene was fired.

On Monday evening, the local currency had recovered slightly to 15.13 to the dollar.

“The facts about the developments that took place last week and the response of the financial markets are well-known,” Gordhan, 66, said.

“Our government is acutely aware of the financial impact this had on those who are invested in this economy.”

– Zuma under pressure –

Zuma has led the ANC since 2007, but the debacle over the key role of finance minister pointed to a major power shift within the party that Nelson Mandela led to power in 1994.

“This represents a very dark day for Zuma, who has clearly been shown the limits of his authority,” leading commentator Ray Hartley wrote in the Rand Daily Mail.

“For someone who projects himself as a political ‘strongman’, this represents a devastating moment. It shows that he simply does not have the power that he believed he had accrued in the party.”

Zuma was accused of sacking Nene partly because the minister had publicly slapped down a move by state-owned South African Airways (SAA) to renegotiate a plane-leasing deal with Airbus.

The president, who has four wives, on Saturday took the unusual step of officially denying rumours that he had a romantic relationship with SAA board chairwoman Dudu Myeni.

Gordhan on Monday issued a sharp warning against alleged malpractice by those involved in state-owned companies, many of which are seen as being controlled by Zuma loyalists.

“It’s time that individuals or groups of individuals stop playing with state entities as if it’s a personal toy from which you can extract money when you feel like it,” Gordhan said.

– Opposition inside ANC-

Nomura analyst Peter Montalto said that it was opposition within the ANC that pushed Zuma to back down over Van Rooyen, who was widely viewed a weak placeman.

“The fact that the ANC is a broad church has actually forced Zuma to reverse his decision in a very damaging move for him personally,” Montalto said.

The president issued a statement late Sunday saying that he was replacing Van Rooyen in response to “many representations”.

Judith February, senior research associate at the Institute of Security Studies in Pretoria, suggested Zuma’s leadership could be under threat from within the ANC.

“This is the lowest point of his presidency,” she told AFP.

“He has lost whatever credibility that he might have left. But we must remember that Zuma is a fighter.”

The ANC, which easily won the 2014 general election, faces local elections next year when it may struggle to retain control of municipalities including Johannesburg, the economic capital.

The party issued a statement welcoming Gordhan’s appointment as “an explicit demonstration of a responsive and accountable government”