Economists sceptical over Zuma's summons for Gordhan

The local currency had been trading at levels against the dollar last seen in July 2015, but then lost major ground after the announcement.

FILE: Finance Minister Pravin Gordhan speaks to potential investors at a Brand South Africa briefing at the World Economic Forum in Switerland on 17 January 2017. Picture: Reinart Toerien/EWN.

JOHANNESBURG – The timing of President Jacob Zuma’s summons for Finance Minister Pravin Gordhan and his deputy to return home has come under fire from economists.

The local currency had been trading at levels against the dollar last seen in July 2015, but then lost major ground after the announcement.

With the rand dropping significantly after Nhlanhla Nene was axed as finance minister, there are fears of the rand crashing once again.

Investment solutions Lesiba Mothata said: “We have seen 9 December which was when the finance minister was removed and the ramifications thereof were quite dire.”

ETM analytics George Glynnos says the latest news is very unfortunate.

“The rand had been strengthening we were looking as though South Africa was on a better wicket.”

“This just says to us there is probably something significant that will be announced by the president,” added Nedbank economist Isaac Matshego.

On the Johannesburg Stock Exchange the banking index dropped almost 3% with financial institutions under pressure.

Rand Merchant Bank's Greg Kennelly says the weaker rand has consequences.

“You are obviously starting with inflation, you are obviously pushing inflation and the cost of living goes up. The central has to then hike rates to contain inflation, which then means everyone’s cost of borrowing has to go up and it also doesn’t do anything for growth.”

(Edited by Masechaba Sefularo)