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Zuma's days are numbered - analysts

Dec 14 2015 10:46
Fadia Salie

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Pravin Gordhan: Let's get down to business

Cape Town - The reappointment of Pravin Gordhan as finance minister late on Sunday has left many a South African speechless, with several analysts reckoning it's the beginning of the end for President Jacob Zuma.

"Well, I am speechless again," said independent treasury specialist Adam Phillips of Umkhulu Consulting on Monday.

In a shock move David van Rooyen, a relatively unknown ANC MP, was abruptly appointed to replace Nhlanhla Nene. But he had hardly sat down in the hot seat when he was replaced by Nene's predecessor, Pravin Gordhan.

"In my opinion this is the beginning of the end for Zuma. He has bowed to pressure from within his own party and that surely cannot be good for him," said Phillips.

One of SA's leading economists, Dawie Roodt, didn't mince his words when he called for a "disgraced" Zuma to step down.

“This is a mess-up of epic proportions. It is like we’re living in Alice in Wonderland.

“I can’t see how on earth Zuma is going to survive as president of South Africa. He must go. He is a disgrace,” charged Roodt.

Phillips said with anti-Zuma demonstrations scheduled for Wednesday, anything could happen. The turnout for these demonstrations might lead the ANC to think about recalling Zuma, he said.

Economist Mike Schussler of economists.co.za said the Gordhan announcement came as a surprise, but now he "believes Zuma is weak and (SAA chairperson) Dudu (Myeni) will go".

The SAA Airbus saga was widely rumoured as one of the main reasons for Nene's deployment to the Brics Development Bank.

"These quick changes show how vunerable we are and how much the minister is worth. Every economist in town - in the private or even public sector - will tell you we have been lucky with the finance ministers we have had. It WAS a strong point.

"Now people will think: what if this happens again, or what if they appoint a person who just takes away, etc," said Schussler.

"Thank the Lord for this. Gordhan and all the others (before Des), I am proud to say, have been the strong point of SA economic policy," Schussler said.

Attempt to avoid junk status

MMI economist Sanisha Packirisamy viewed Zuma’s latest decision to reappoint Gordhan as the potential for a reinstatement of fiscal discipline and an effort to prevent a further sovereign rating downgrade. This way, SA can avoid the higher borrowing costs associated with junk status.

"Although the reversal of the controversial decision - to replace the widely-respected Nene with the relatively unknown Van Rooyen - should see some stabilisation in investor sentiment and market prices, local and global investors will continue to question government’s process of decision-making, which has created further ambiguity around economic policy in an already fragile growth environment."

You can't make this up, was the reaction of Peter Attard Montalto, emerging markets economist at Nomura International. “After the shock appointment of Van Rooyen on Wednesday night he didn't even have his feet under the desk and he is now off to be Minister of Cooperative Governance, with Pravin Gordhan moving back to his old job as Minister of Finance.

“Our initial understanding is that there was such a sense of the countrywide grief at the loss of Nene and gloom and pessimism from civil society, business, unions and others that mobilisation was increasingly made within the ANC, to ANC secretary general Mantashe especially, which forced this change.”

Montalto described Gordhan as very market friendly, fiscally conservative and a welcome move (“though I suppose this begs the question why we simply couldn't go back to Nene?”).

Nene remains in wilderness

He said Nene remains in the wilderness, which he thinks speaks to the fact his sacking was "real" and "personal" around SAA and the nuclear build programme and it was not an acceptable political option to bring him back. Putting Van Rooyen in he Department of Co-operative Governance saves him some face but the problem remains that he has no experience, said Montalto.

“All eyes will increasingly remain on politics and especially that ‘other’ reshuffle (energy) we still see as on the cards maybe in the new year now.”

Fin24 user Ryk van Jaarsveld quoted Oliver Cromwell's advice to King Charles I as "very good advice for Zuma": "You have sat too long for any good you have been doing lately... Depart, I say; and let us have done with you. In the name of God, go!"

On the rand's expected reaction to the cabinet re-reshuffle, Phillips said he thinks it is important not to view it in the same way as in 2001.

"Then, we went from R9.00/$ (in) October to R14.00 (on) 21 December. We then retraced back to R11.00 by 31 December. Then we had Mbeki in charge, but did not have a rating. If Pravin can protect that rating, then he might be seen in the same light as Trevor Manuel.

"To do that he has to tighten government spending and look at the SAA and nuclear deals. He has to be his own man and tell it to Zuma like it is. I still think Zuma's days are numbered and I hope the numbers that demonstrate on Wednesday will leave him with no alternative."

Phillips expects the rand to move below R15.00/$ but cautioned there will be some support from importers, and that the US Federal Reserve decision later this week will play its part.

"If (chair Janet) Yellen says 'don't expect another cut for a while' then emerging market currencies could appreciate. There are too many buts and markets don't like that."

The rand did move briefly below R15.00 to R14.94 in overnight trade, but has been trading in a broad range between R14.9420 and R15.8847. It was last trading 5.03% firmer at R15.09 from Friday's close of R15.89.
 

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