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Investors favour insiders to head Treasury

Apr 13 2017 19:30
Arabile Gumede, Bloomberg News

Johannesburg - Investors would prefer the appointment of an internal candidate to head South Africa’s National Treasury because this would maintain stability in managing the country’s finances, analysts said.

Lungisa Fuzile, 51, asked to leave his director general position in May, a year before his contract expires. He said he made the request before President Jacob Zuma fired Pravin Gordhan as finance minister on March 31. Fuzile, who is widely respected, said he would leave due to family reasons.

When Gordhan and his deputy Mcebisi Jonas were replaced by lawmakers with no Treasury experience, both S&P Global Ratings and Fitch Ratings downgraded the nation’s debt to junk on concern about policy continuity and political instability. The president feuded with Gordhan about the management of state-owned companies and spending on a planned nuclear programme that the former finance minister said the country couldn’t afford.

“If there is any possible chance of damage control, it’s with an internal appointment to Fuzile’s job,” Chris Gilmour, an investment analyst at Absa Investments and Wealth Management, said by phone. “You want to get a degree of continuity and that will be something the ratings agencies are looking for.”

Zuma appointed former Home Affairs Minister Malusi Gigaba to replace Gordhan and made Sfiso Buthelezi, an MP with the ruling African National Congress, his deputy. The cabinet reshuffle sparked weakness in the rand, with the currency becoming the world’s worst performer against the dollar since then.

Gigaba will try to complete the process of finding a replacement for Fuzile by mid-May, he told reporters in Cape Town on Thursday.

Potential candidate

The president told party officials that he had favoured Brian Molefe, a former chief executive officer at state-owned power utility Eskom Holdings, as finance minister, a person with knowledge of the matter said last month.

Molefe resigned from Eskom in November after being implicated in a graft ombudsman’s report for favouring members of the Gupta family, who are in business with Zuma’s son, in awarding contracts. Molefe denied wrongdoing and Zuma has challenged the findings.

Molefe previously served as a deputy director general at the Treasury and was the CEO of the Public Investment Corp., which handles state pensions and is the continent’s biggest pension-fund manager, for seven years. Under his tenure, funds under management more than doubled, and he made the PIC’s voting records public.

Molefe could replace Fuzile, “and that won’t go down well with the ratings agencies,” Gilmour said. “I don’t think it’s something that Molefe would naturally gravitate towards considering his previous high-profile posts, so I’d be surprised unless it is seen as a stepping stone to the top position of finance minister.”

Given that Molefe served in the department almost 14 years ago, he would be familiar with its workings should he get the job, said George Herman, chief investment officer at Citadel Investment Services in Cape Town. “It would be full circle for Mr. Molefe to go back there, so I think it would be difficult to be critical of such a move,” he said by phone.

Appointment timing

The government extended Fuzile’s contract for two years in April 2016. He has served as director general since 2011 and was head of asset and liability management in the Treasury before that.

Gigaba will look both internally and externally for Fuzile’s replacement, adding this should happen quickly to provide stability and certainty, he said on Wednesday.

The new finance minister will name the successful contender at the end of the month. The Treasury has a “proud tradition” of capable leaders and some are sure to apply for the post, he said.

The Treasury is a strong, professional institution and “we want to keep it that way”, Gigaba said. “We are happy with the team we found and trust they will remain.”

The new director general must be of “the same stature as the governor of the Reserve Bank or someone like Maria Ramos,” who is CEO of Barclays Africa Group. Both Ramos and central bank Governor Lesetja Kganyago were directors general at the Treasury.

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