Appointment of new finance minister boosts S. African market

Financial index at the Johannesburg Stock Exchange (JSE) gained 8.58 percent at the opening on Monday following the appointment of Pravin Gordhan as the new Finance Minister.

President Jacob Zuma on Sunday night appointed Gordhan, current Minister of Cooperative Governance and Traditional Affairs, as finance minister to replace David van Rooyen, who was appointed only four days ago.

Gordhan was the second finance minister appointed by Zuma in four days. Gordhan's appointment gave a boost to the market. The South African rand recovered to 15.09 rand from 15.89 rand immediately after the news broke late Sunday night. This was the currency's biggest one-day advance since October 2008.

The rand had fallen about eight percent to major currencies since Zuma fired Nhlanhla Nene on December 9 and replaced him with Van Rooyen, a largely unknown MP.

The local currency briefly breached 16 rand against the dollar in nervous trade on Friday in response to the unexpected axing of Nene and the appointment of Van Rooyen.

Explaining his decision to appoint Gordhan as finance minister, Zuma said he had received many representations to reconsider Van Rooyen's appointment.

"As a democratic government, we emphasize the importance of listening to the people and to respond to their views," Zuma said.

The decision was taken after serious consideration and reflection, he said.

Gordhan's appointment has received positive market response thanks to his financial experience, said Nsununguli Walter Mbongolwane, a project management consultant from Expert Factor.

Gordhan, who was finance minister from 2009 to 2014, is well known for his fiscal discipline and has rich experience of handling finance issues, Mbongolwane told Xinhua.

Althgough Gordhan's appointment raised hopes on the markets, bigger problems remain to be addressed by the government, Mbongolwane said.

"Gordhan will be welcomed by the market on a short term. But there is nothing he can do for lack of economic dynamics. There is a bumpy road ahead as the economy is growing at a slow pace," said Mbongolwane.

He pointed to the downgrading of four of South Africa's major banks by international rating agency Fitch last Friday.

"These are a pointer that things are not going well. There is little economic growth. The downgrading means that these banks cannot not attract investment from outside the country," Mbongolwane said.

Fitch downgraded the long-term foreign and local currency Issuer Default Ratings (IDR) of FirstRand Bank Limited (FirstRand), Nedbank Limited (Nedbank) and The Standard Bank of South Africa Limited (SBSA) and the respective rated holding companies of the last two banks.

The banks have been downgraded from triple B status to triple B-minus status.

"This can also mean that some people banking in these banks can move their money to other countries with a stable economy. These are risks associated with a depressed economy," said Mbongolwane.

He warned that South Africa might fall into recession considering negative factors such as strikes, the fall in commodity prices, unreliable electricity supply and rising corruption. Enditem