After last week's surprising announcement that well-respected finance minister Nhlanhla Nene was being replaced by little-known David van Rooyen, comes another surprising, albeit very welcome, announcement that Pravin Gordhan (pictured) will instead take over as finance minister.
Almost immediately, the rand strengthened against the dollar, gaining 6%, having plummeted rather spectacularly since news of Nene's sacking broke. Coupled with the rand's weakening was a R169 billion drop in share values on the JSE.
In what many are saying appears to be damage control measures, President Zuma announced on Sunday night that Pravin Gordhan, minister of Cooperative Governance and Traditional Affairs, would resume the duties he previously held as minister of finance.
In its most recent statement the Presidency said:
"On the 9th of December 2015, I announced the appointment of a new Minister of Finance, Mr David van Rooyen. I have received many representations to reconsider my decision. As a democratic government, we emphasise the importance of listening to the people and to respond to their views. In this regard, I have, after serious consideration and reflection, taken the following decision; I have appointed Mr Pravin Gordhan, the current Minister of Cooperative Governance and Traditional Affairs as the new Minister of Finance. Minister Gordhan will return to a portfolio that he had held proficiently during the fourth administration . I have also decided to appoint the current Minister of Finance, Mr David van Rooyen, as the new Minister of Cooperative Governance and Traditional Affairs . I wish both Ministers all the best in their new deployments."
Nicky Newton-King, CEO of the JSE, says it is not just the numbers that matter, and that such decisions hurt ordinary South Africans.
In a statement the CEO said:
"While the JSE systems were able to handle this unprecedented activity, we should not just be concerned about the immediacy of market reaction but should be mindful of the longer-term impact on the financial stability of our economy. Market losses put strain on credit extension and interest rates, and raise borrowing costs for companies and individuals. As cost of capital becomes more expensive, this in turn constrains the growth stimulus which we desperately need. The outlook for much needed job creation opportunities diminishes. And higher lending rates make everyday life more expensive for ordinary South Africans. Continued currency depreciation will have a profound impact on fuel prices and on inflation overall, which will hurt companies, small businesses, and individuals. We should remember that behind the daily statistics are the life savings of ordinary South Africans which are likely to be negatively impacted. This will put pressure on the ability of people to fund their health and housing requirements, their household budgets, their children's education and their entrepreneurial aspirations. As individuals and as corporates we need to be aware of how we are impacted by the seriousness of this moment and take accountability for how we respond."
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