Gordhan’s appointment changes nothing: Fitch
Ratings agency Fitch says that the replacement of a second finance minister in South Africa within five days has not enhanced confidence in government effectiveness.
Mostly, it leaves questions over the direction of economic policy, the group said in a statement on Monday.
“In this context, February’s budget will be an important event in assessing the government’s commitment to prudent management of the public finances.”
President Jacob Zuma on Sunday announced that Pravin Gordhan would replace David van Rooyen as finance minister.
Unlike van Rooyen, Gordhan is a known quantity, Fitch said. He served as finance minister from 2009 to 2014 and built up a reputation for disciplined management of the public finances.
In a press conference held on Monday, Gordhan said that the government’s expenditure ceiling is “sacrosanct” and that “we will unreservedly continue our fiscal consolidation process and we will stabilise our debt in the medium term”.
“Fitch views the nominal non-interest ceiling, which the government has met since 2012, as an important pillar of fiscal discipline.”
However, the reappointment of Gordhan does not remove all the uncertainty over government effectiveness and the coherence and credibility of economic policy generated during a turbulent week, the group said.
“The earlier appointment of van Rooyen in place of Nene still raises questions over Zuma’s motivation for the change and what it reveals about his economic policy preferences.”
The group said it was still seeking clarity on a number of issues, including the country’s plans surrounding the nuclear build and the procurement process involved.
It maintained that, after its downgrading of South Africa to the lowest investment grade above junk in early December, a stable outlook remained.
However, any change in fiscal policy, or further failure to narrow the debt-to-GDP ratio in the country could result in the country being junked in the next rating.
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