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Treasury debunks theories about UK investor roadshow

Mar 29 2017 06:29
Matthew le Cordeur

Pretoria – National Treasury on Tuesday debunked various theories and queries about Finance Minster Pravin Gordhan’s investor trip to London and Deputy Minister Mcebisi Jonas’s cancelled trip to the US.

On Tuesday, BDFM editor-in-chief Peter Bruce referred in a column to a “by-now-typically-incoherent, intelligence report” alleging that Treasury was having secret meetings to start “operation check mate”, a move to avert the possible firing of Gordhan and Jonas.

READ: Three concerns of investors and rating agencies - Treasury

“The bankers are going to be told that the Ministry of Finance and Treasury stand together against the president and the corruption of the Gupta’s,” a screenshot of the report inserted in the column said. “They will inform the banks that if they are fired the financial markets in South Africa will collapse and the rand will go to 18 to 20 to the dollar.”

The rand has weakened by almost 5% since President Jacob Zuma ordered him home from the roadshow on Monday.

READ: Markets turbulent, rand 4.8% weaker than pre-Gordhan recall news

Without referring to this allegation, Treasury on Tuesday made it clear that their investor roadshows to the UK and US were essential to keep the country afloat financially.

“Government on a weekly basis needs to borrow more than R13bn in the domestic market,” Treasury said in a statement on Tuesday. “Of government’s total borrowing requirement, $6bn needs to be raised in the international market over the next three years to partly meet government’s foreign commitments.”

“One of the clear benefits of the roadshows is that South Africa is one of very few countries that do not have to meet investors before issuing an international bond,” it said.

“In other words, the South African government is able to raise amounts as high as $3bn within a matter of three to five hours. This has been the case for the last five years now.”

As such, Treasury said it has to keep both rating agencies and investors informed about fiscal and monetary policy developments, more specifically and about topical contemporary policy issues in SA.

“This information is crucial for investors to commit the funds under their management by buying South African government bonds (by lending to the South African government) and form their opinions about SA’s credit worthiness and thus to pronounce on the country’s rating.

“The ratings in turn determine the cost at which SA will borrow the R730bn it will need to meet its borrowing requirement for the next three years.”

FULL STATEMENT: Gordhan's eight hours in London

This explanation may also answer political analyst Botsang Moiloa’s concern with the investor roadshow.  

Appearing on Gupta-owned ANN7 on Monday, Moiloa questioned Gordhan’s “frequent trips overseas … have had minimal contribution to economic transformation in the country”.

He also questioned by Gordhan “regularly attends roadshows in London and the United States instead of with developing nations”.

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