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Malikane's attendance at US trip raises flags - DA

Johannesburg - Professor Chris Malikane’s attendance at the IMF/World Bank Spring Meeting, alongside Finance Minister Malusi Gigaba may send the wrong message to investors, said the Democratic Alliance.

The party’s MP David Maynier warned in a statement that Malikane’s attendance at the investor roadshow in the US raises a “red flag” to international financial institutions, international investors and rating agencies.

“The fact that the minister invited Professor Chris Malikane to accompany him on the international roadshow raises serious questions, not only about his judgment, but also about whether he can be trusted to act in the best interests of South Africa,” said Maynier.

Malikane, an associate professor of economics at the Wits School of Economics and Business Science, had written an opinion piece in the Sunday Times, promoting nationalisation of bank, mines and insurance companies.

Subsequently Treasury had distanced itself from the piece, saying that the views expressed by Malikane were not government policy. At a briefing ahead of Gigaba’s trip to the US, the finance minister reiterated these views. He assured that the country remains committed to a path of fiscal consolidation and that the government’s policies do not entail nationalisation.

READ: Gigaba reins in aide, says Malikane not a zama-zama

Gigaba also defended Malikane’s appointment, saying that he embraced different schools of thought and that he would consider the facts presented to him, before taking decisions.

However, Maynier pointed out that this was just an effort of “damage control” for the investor confidence which may have been “shaken” by Malikane.  

“The minister was forced into damage control mode reassuring investors that it was not government policy to nationalize banks,” he said.

In an interview with City Press, Malikane clarified his new role at Treasury. “I have to challenge public opinions that mislead the nation,” he told City Press.

He added that investors should understand that South Africa is still an investment destination, and that the Cabinet reshuffle should not lead to people having doubts.

However research by BMI, part of Fitch Group Company, suggests that the Cabinet reshuffle will undo efforts toward fiscal consolidation and reform in state-owned enterprises.

READ: Cabinet reshuffle threatens fiscal consolidation – research

There is increased potential for short-term fiscal slippage, but the biggest threats remain for the long term, research showed. “Government may take [a] softer stance in public sector wage negotiations, [a] new agreement [is] due in 2018,” the report read.  

There are also concerns that Treasury is less likely to place stringent conditions on SOE guarantees, which would increase the state’s contingent liabilities.

Reserve Bank Governor, Lesetja Kganyago had previously said that Gigaba should be given time to settle in his job before judgments can be passed on his performance, Bloomberg reported.

He added that Gigaba's appointment had not severed ties between the Reserve Bank and Treasury.

During his trip, Gigaba met with ratings agency Moody's and described the engagement as "robust" and "constructive", Bloomberg reported. The ratings agency will send a team to South Africa in May where the minister plans to engage with them further. 

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