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 Zuma appointed the widely respected Gordhan late on Sunday, his
second stint in the job, in a dramatic U-turn that gave Africa's
most industrialized economy its third finance minister in less than
a week.
Fallout from the sacking last Wednesday of Nhlanhla Nene in favor of
relatively unknown and untested David van Rooyen has also clouded
the political reputation and future of Zuma, 73, within the his
African National Congress party.
His initial appointment of van Rooyen, a Zuma loyalist in
parliament, touched off a critical storm and selling frenzy in the
rand currency, stock and bond markets.
Seeking to reassure markets, Gordhan told a televised news
conference on Monday: "We take account of the concerns of the rating
agencies and investors and we shall endeavor to protect the
investment grade rating of South Africa."
Credit agency Fitch downgraded South Africa on Dec. 4, leaving the
continent's most sophisticated economy just one notch above "junk"
status, and said on Thursday the dismissal of Nene had "raised more
negative than positive questions".
By 1216 GMT on Monday, the rand had strengthened by 5.07 percent
against the dollar to 15.0850, recouping some losses suffered last
week and putting it on course toward its biggest daily percentage
rise since 2008. The rand had traded at 14.4320 per dollar before
Nene was fired.
South Africa is girding for local elections next year in which the
ANC will face stiff competition from the opposition Democratic
Alliance in urban areas, including the economic hub of Johannesburg.
The countryside remains an ANC stronghold.
Even some supporters of the ANC, Nelson Mandela's erstwhile
liberation movement that has ruled since the end of apartheid in
1994, expressed dismay about Wednesday's appointment of a Zuma
loyalist to the crucial finance post.
They also described the return to the ministry of Gordhan, who also
held the job from 2009 to 2014, as a sign Zuma was losing his grip.
"It may not be his death knell, but it's certainly the turning of
the tide," said Ben Turok, a former senior ANC legislator and
anti-apartheid activist.
MARKETS CHEER GORDHAN
The rand fell nearly 9 percent last week following the removal of
Nene, a civil service veteran keen to rein in government spending,
leading to vague talk the South African central bank might call an
emergency monetary meeting.
But Reserve Bank Governor Lesetja Kganyago said there were no plans
for a special session because South African capital markets were
deep enough to withstand shocks of this magnitude.
Yields on government bonds recovered sharply in early trade on
Monday, with the benchmark paper due in 2026 down 107 basis points
at 9.31 percent.
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The banking index shot up 13 percent in afternoon deals, erasing
most losses sustained last week, and the broader market seesawed in
and out of the red during the session.
"The markets will welcome back Gordhan to National Treasury. He is a
known entity, is his own man and did well when in the post
previously," Rand Merchant Bank currency strategist John Cairns
said. "But it is certainly unreasonable to expect all of last week's
losses to be reversed - a huge amount of uncertainty has been
created in the past few days."
Gordhan also said his office would ensure that South Africa stuck to
fiscal prudence including on any deals relating building of nuclear
power stations.
LASTING DAMAGE
Gains in South African assets are expected to be short-lived with
some analysts citing lasting damage to South Africa's image as a
stable emerging market and this week's direction of the U.S.
interest rates, which are widely expected to be raised.
"Markets should rally back very strongly but I would not expect a
total retracement with a permanent loss of trust in leadership even
if we are in a better place," said Peter Attard Montalto of Nomura
in London.
Zuma has said his about-face on the helm of the Finance Ministry was
prompted by many calls to rethink his decision.
Kokkie Kooyman, a fund manager at Sanlam Investment Management
Global, said the president made it seem as though fiscal prudence
was not a concern for him.
"Members of the cabinet may have managed to convince him to change
his mind. However a leopard doesn’t change its spots. We still have
the same president. We will still have high unemployment and high
debt. Rating agencies will not re-rate us upwards."
(Additional reporting by James Macharia, Zandi Shabalala, Nqobile
Dludla and Thekiso Lefifi; Writing by James Macharia and Tiisetso
Motsoeneng; Editing by Mark Heinrich)
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