Analyst: New Finance Minister Malusi Gigaba will have to learn quickly
The Presidency released a statement in the early hours of Friday morning announcing the changes to President Jacob Zuma's Cabinet.
JOHANNESBURG – The rand is reeling in the wake of the Cabinet reshuffle.
Economist Iraj Abedian says newly appointed Finance Minister Malusi Gigaba and is deputy will have to learn the ropes quickly.
“You’ve a minister and deputy minister who have zero experience in finance and a lot of unfortunate baggage in different capacities and positions.
“So there’s no doubt at all that they’ve a lot of learning to do, both from the financial point of view and from the fiscal management point of view
Econometrix economist Azar Jammine says the markets are not going to like the reshuffle.
“It was a purge of all those who were against Zuma, in favour of those who basically are going to be close to him and this relates to the finance ministry.”
The Presidency released a statement in the early hours of Friday morning announcing the adjustments affecting 20 people.
President Jacob Zuma says the changes bring some younger Members of Parliament and women into the national executive to benefit from their energy and experience.
On Thursday, the president called a meeting with the African National Congress (ANC)’s top six in the capital amidst speculations that he could be changing his Cabinet.
Finance Minister Pravin Gordhan, Energy Minister Tina Joemat-Peterson, Transport Minister Dipuo Peters, Public Service and Administration Minister Ngoako Ramatlhodi and Tourism Minister Derek Hanekom have all been axed.
Ebrahim Fakir, who says the sudden changes at Treasury are cause for concern.
“We can’t be consistently having new people in portfolios which require a degree of stability over time. It doesn’t happen.”
Meanwhile, Dr Somadoda Fikeni says the reshuffle will not do the African National Congress (ANC)’s unity campaign any favours.
“It is likely to simply deepen divisions within the ANC alliance partnership and within the ANC itself and it might just make matters worse with the party heading to the policy conference.”
Economist Russel Lamberti says he cannot imagine a good outlook for the South African economy in the wake of the news of Finance Minister Pravin Gordhan and his Deputy Mcebisi Jonas being fired.
Lamberti says South Africa may be in for a rough couple of weeks, with probabilities of the rand reacting the same way it did when former Minister Nhlanhla Nene was removed and even worse.
“The likelihood is that the foreign investment community, the local investment community are going to see it in a very bad light and it looks like we’re in for another rough ride. It looks like a repeat of December 2015 but this time maybe more rougher.”
The rand is in free fall on the back of the Cabinet reshuffle and this could mean the interest rate may not be cut later this year as had been speculated.
Governor Lesetja Kganyago announced the repo rate will remain unchanged at 7%, leaving the prime lending rate at 10.5%.
He says although economic growth remains weak, the bank has adjusted its forecast upwards to 1.2% for 2017.
“The MOPC is of the view that we have reached the end of the tightening cycle, however, the committee would like to see a more sustained improvement in the inflation outlook before changing rates.”
He says the inflation outlook has improved due to the appreciation of the rand in recent months.
“The risk of further and weakening overshadows the inflation outlook.”
The central bank expects inflation to move back within the target range of between 3.6% in the second quarter of next year.
(Edited by Leeto M Khoza)