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Gordhan exit will make junk status inevitable - actuarial scientist

Aug 24 2016 23:33
Karabo Ngoepe, News24

Pretoria - A chaotic exit for Finance Minister Pravin Gordhan similar to that of Nhlanhla Nene will send a message to the markets that more such shocks are likely in store for the future.

This is according to an actuarial scientist who warned on Wednesday that the removal of Gordhan will likely lead to a junk status downgrade for the country.

“A sovereign credit rating downgrade to junk status in December 2016 or even earlier is highly probable if Minister of Finance Pravin Gordhan, suffers a similar or worse fate than former minister of finance Nhlanhla Nene,” Dr Conrad Beyers from the Department of Actuarial Science at the University of Pretoria said.

More on Gordhan:

Gordhan battle: SA staring down edge of economic abyss

Rand takes beating as Gordhan drama deepens

Open letter to President Jacob Zuma: Hands off Gordhan

FULL STATEMENT: Why Gordhan won't meet the Hawks

Beyers said it was clear that credit rating agencies regarded politically related risks as the single major factor that may influence their ratings decisions for South Africa.

“If you scrutinise rating agency reports on South Africa, as well as public statements and assessments by rating agencies, political risk currently vastly overshadows all other risks.”

Beyers said the importance of political risks in South Africa implied that positive government action can contribute significantly to create confidence and to provide reassurance to the business community and rating agencies about South Africa’s economic prospects.

He pointed out that positive action by Deputy President Cyril Ramaphosa and Gordhan, in collaboration with prominent South African business figures - so-called Team South Africa - helped to avert a seemingly inevitable ratings downgrade earlier in 2016.

Sacrifice the country’s economic well-being

However, he cautioned that a second major shock to the Treasury would likely confirm the fears of ratings agencies that there is a willingness in key government circles to sacrifice the country’s economic well-being for ulterior motives.

“Team South Africa convinced credit ratings agencies that the chaotic exit of Nene in December 2015 was a once-off event that will not be repeated, and the rating agencies apparently gave South Africa the benefit of the doubt.

"However, a similar chaotic exit of Gordhan will illustrate that the ‘Nenegate’ event was not once-off and that more such shocks are likely in store for the future. In the light of the dominance of political risks in credit rating agency assessments of South Africa, a rating downgrade will most likely be a ‘no-brainer’,” said Beyers.

Gordhan has been ordered to report to the Hawks office on Thursday at 14:00 as the Sars Wars debacle continues. Gordhan’s role as commissioner of the SA Revenue Service when an undercover investigation unit was established is being questioned by the Hawks, who are investigating whether the unit went rogue and performed illegal activities.

Gordhan has since refused to appear before the Hawks, saying he was under no legal obligation to present himself to the police.

READ: 12 ways Gordhan reacted to relentless Hawks onslaught

A looming catastrophe

Equal Education said there was a need to protect the Treasury and the country from catastrophe.

"Defending the Treasury does not mean defending ANC economic policy that has left ill-gotten White wealth intact, and it does not mean defending racialised inequality. Our record is one of fearlessly contesting ANC economic policy and fighting against white economic supremacy,” the organisation said in a statement.

It added that the struggle to steer economic policy towards redistribution and pro-poor development is why it existed and it would not stop in its mission.

“But it becomes an impossible task when the funds available end up in vanity projects, private political pockets and corporate subsidies for friends. The reality is that Zuma does not represent the urgent struggle against poverty, inequality, patriarchy and racism,” said Equal Education.

Listen to the clip by Gordhan declaring that he will not appear before the Hawks:

Read Fin24's top stories trending on Twitter:

sars  |  pravin gor­dhan  |  sars wars
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