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10 days of shocks and surprises for SA

Dec 15 2015 07:22
Susan Erasmus

Cape Town - It has indeed been quite a week in the world of SA finance. It included a downgrading by Standard & Poor's and by Fitch Ratings, a cabinet meeting, an NHI white paper announcement, and three finance ministers in quick succession.

All of this to the background tune of the rand falling sharply and a sell-off of government bonds.

Here are some of the most surprising and grim things that went down in the last 10 days.

1. Getting closer to junk status

The two credit rating companies, Standard & Poor's and Fitch Ratings downgraded SA’s debt to just short of junk status at a time when government policies are negatively affecting business confidence, the interest rate is at a 5-year high, the weakened rand is fuelling inflation and the GDP is growing at 1.4% -  its slowest rate since the recession in 2009. This probably did not come as a surprise to those in the know, but it certainly will have a nasty effect on the average South African, who will experience the long-term effects of this as another nasty surprise with regards to the buying power of his/her salary.

2. The axing of Nhlanhla Nene

Without warning, and apparently without informing the cabinet, President Zuma announces the removal (and redeployment) of Nhlanhla Nene as Finance Minister, and announces the appointment of politically unknown David van Rooyen as his successor. This certainly came out of nowhere and caught the country by surprise – and presumably also Nhlanhla Nene.

3. The appointment of David van Rooyen

The media scramble to find out more about the relatively unknown David van Rooyen, a former small-town mayor in Gauteng. His appointment came as a huge surprise – and not a nice one. He may be quite competent, but little is known about him or indeed his knowledge of financial matters.

3. An explanation from President Zuma

President Jacob Zuma, in an effort to limit the damage from the shock removal of Nene says that he was being put forward to head a BRICS bank position, but most people appear to find this explanation unconvincing. What was surprising about this is that the President felt an explanation was necessary – it has never been a trademark of his Presidency.

4. The rand goes into freefall

The rand continues to do poorly and trades at R15.49/$, and over R24/£. While this is not a surprise in itself, the extent of the drop in the exchange rate clearly made both government and citizens nervous, possibly prompting action to try and limit the damage to the economy.

5. A reversal of a presidential decision

President Zuma is not known for changing his mind. The surprise was not only that he did so, but what on earth could have prompted this decision from him? Economic disasters and personal scandals never seem to perturb him – so what was different this time? I suspect we will still be surprised in the future by his reasons for doing this.

6. Re-instatement of Dr Pravin Gordhan

He was pretty much sidelined by his deployment as the Minister of Cooperative Governance and Traditional Affairs when Nhlanhla Nene was appointed as Minister of Finance. His re-appointment came as a huge surprise, not because he isn’t competent, but because he clearly got on the wrong side of the President in the past – hence his former redeployment.

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