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S.Africa finance official imitates Magufuli, fired


Sacked Finance Minister Nhlanhla Nene

South African President Jacob Zuma took the economy closer to the brink of a junk credit rating after firing his finance minister in a move investors say may undermine fiscal credibility.

Zuma removed Nhlanhla Nene from his post after 19 months without giving any reasons except to say that he would be moved to another key role.

His replacement is David van Rooyen, a lawmaker who is little known to South Africans or investors.

The shock move came less than a week after credit-rating companies pushed the nation closer to junk status, citing concerns over a sluggish economy and rising debt.

Nene’s departure, and uncertainty relating to his successor, raises questions about whether the National Treasury can stick to its spending targets.

“Especially at this point in time, we can ill afford to antagonize international investors,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg.

Van Rooyen is the third finance minister since Zuma came to power in 2009.

In that period, gross debt has surged from about 26 percent of gross domestic product to almost 50 percent.

Nene tried to imitate what Tanzanian president, John Magufuli, is doing; cutting government expenditure in all sectors.

Nene, like Magufuli, sought to contain spending in a bid to rein in a widening budget deficit, his efforts have been frustrated by the government awarding above-inflation wage increases to workers over three years.

Nene said in the mid-term budget in October the fiscal deficit will reach 3.3 percent in the fiscal year through March 2017, from 3.8 percent this year, and will narrow to 3 percent in the year through March 2019.

“We are just trying to assess whether there will be any change in policies associated with the change in Treasury leadership,” Kristin Lindow, senior vice president at Moody’s Investors Service, said by phone from New York on Wednesday.

“The sudden removal of the high profile and respected Nene, and his replacement with a relative unknown, is likely to be seen as a worrying signal about the government’s commitment to fiscal discipline and generate further market volatility,” Peter Worthington, an economist at Barclays Plc’s Africa unit in Johannesburg, said in a note to clients.

The economy has floundered under Zuma’s leadership.

The government has introduced a series of laws that companies say foster uncertainty and discourage investment, while spending decisions, such as the capping of university fees, were taken without proper budgeting.



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