May 11 (Bloomberg) -- South Africa’s appointment of Pravin Gordhan as finance minister and Trevor Manuel as head of a new planning commission is “encouraging,” easing concern that the government will alter economic policy, Standard & Poor’s said.

President Jacob Zuma’s decision “gives us assurance of policy continuity,” Konrad Reuss, Standard & Poor’s director of sovereign ratings for Africa, said in an interview in Dakar, Senegal yesterday.

S&P in November cut the outlook on South Africa’s BBB+ credit rating to ‘negative’ from ‘stable’ as economic growth slowed and concern mounted that a new administration will ditch Manuel’s conservative fiscal policies. Manuel, who was finance minister between 1996 and 2009, produced the country’s first budget surplus since at least the 1960s in 2007.

“One uncertainty is gone and we very much welcome this prospect of policy continuity,” Reuss said. “In coming months we’ll see how policy makers deal with the significant pressures they are faced with.”

Gordhan’s appointment will probably be welcomed by financial markets because of his track record as head of the South African Revenue Services, where he tripled tax collection in a decade. He is likely to follow an “orthodox approach to fiscal policy,” Reuss said, using a “well-functioning and impressive machinery” in the National Treasury.

Trevor Manuel

Manuel was retained in Zuma’s Cabinet in a newly created position within the presidency to oversee policy planning.

His switch from the finance ministry wasn’t aimed at “limiting his power,” Zuma said. He will now control a “very powerful structure that is going to work out a national plan of government.” The president also named Ebrahim Patel as head of a newly created Economic Development Ministry.

Reuss said it would be too early to consider raising South Africa’s credit rating outlook because he wanted to see how the new administration will deal with an economy that is forecast to contract for the first time in 17 years and rising job losses.

“Given the challenges and pressures at the moment, it would be premature to expect at this point that we would react on the outlook,” Reuss said. “It will be important to see, from our perspective, that with the slowdown in the economy, challenges in the labor market and related social pressures, that they don’t translate into unsustainable policies.”

South Africa’s economy, the biggest on the continent, contracted for the first time in a decade in the fourth quarter, with output dropping an annualized 1.8 percent. The unemployment rate, the highest of 62 countries tracked by Bloomberg, climbed to 23.5 percent in the first quarter from 21.9 percent in the previous three months, the statistics office said on May 5.

Reuss spoke at the African Development Bank’s annual meeting in Dakar yesterday.

To contact the reporter on this story: Nasreen Seria in Dakar, Senegal at nseria@bloomberg.net.

Last Updated: May 11, 2009 03:04 EDT