Zuma set to sack Gordhan as rand continues to fall: report
The rand continued to lose ground against major currencies on Tuesday amid reports that president Jacob Zuma is set to axe finance minister, Pravin Gordhan.
Bloomberg, citing three people with knowledge of the matter, said that Zuma told senior leaders of the South African Communist Party (SACP) of his intention to boot Gordhan.
Rumours have been circulating for some time among analysts that a cabinet reshuffle is on the cards.
The rand tumbled 3% against the dollar in trade on Monday, after the president cancelled an international investor roadshow, and ordered Gordhan and his deputy, Mcebisi Jonas, back to the country “urgently”.
And on Tuesday morning (1oh00), the rand continued to lose ground against major currencies:
- Dollar/Rand – 1.73% weaker at R12.96
- Pound/Rand – 1.81% weaker at R16.26
- Euro/Rand – 1.54% weaker at R14.05
Zizi Kodwa, a spokesman for the ANC, told Bloomberg that its sources were misinformed about Gordhan’s sacking.
However, Enoch Godongwana, the ANC’s head of economic policy, said: “I don’t know if it’s true that Gordhan will be fired. If that were to happen, it would be tragic for the economy.”
Jonathan Hertz, chief executive officer of Peregrine Holdings, warned on Monday that if Gordhan or his deputy, Mcebisi Jonas, are fired, “the selloff will be vigorous…there will be a shudder in the market. I think you could see R14 (to the dollar).”
Wayne McCurrie, a fund manager at Ashburton Investments, said that if Zuma did fire Gordhan, the rand would not shoot back to R17 to the dollar, a level it last touched following Zuma’s sacking of the previous finance minister, Nhlanhla Nene, in December 2015.
McCurrie said that commodity prices had since improved, as had the country’s drought situation. He warned, however, that it could go to R15 to the dollar, ‘easily’.
Manisha Morar, an analyst at ETM Analytics told Bloomberg that a cabinet reshuffle would raise the possibility of a downgrade “coming sooner than later”.
Rating agencies S&P and Fitch both rank the sovereign debt of Africa’s most industrialised economy one level above junk, while Moody’s puts it two notches higher.
Moody’s, which put South Africa on negative watch in its latest review, is due to review that rating on April 7, followed by S&P at the beginning of June.
Research analyst at Nomura, Peter Attard Montalto said that, should Zuma fire Gordhan, an immediate rating cut from at least one of the ratings agencies would be likely.
Read: Why Zuma wants Gordhan to come back to South Africa: analysts
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