- Lungisa Fuzile's new contract needs sign-off from cabinet
- Investors seek continuity at Treasury in turbulent times
South Africa’s government is in the process of extending National Treasury head Lungisa Fuzile’s term, a decision that may settle investor concerns over the management of the nation’s finances, according to two people with knowledge of the matter.
In the coming weeks, the cabinet will sign off on Finance Minister Pravin Gordhan’s recommendation that Fuzile’s five-year term be extended beyond its May 15 end, the people said. They asked not to be identified because the information isn’t public yet.
“Market preference would be for him to stay because he is very market-friendly and very astute within his role,” Gina Schoeman, an economist at Citigroup Inc. in Johannesburg, said by phone on Thursday. “He does a good job. We would be surprised if it wasn’t renewed.”
Investors have sought signs of stability since President Jacob Zuma roiled markets in December by replacing the respected Nhlanhla Nene as finance minister with a little-known lawmaker. The president reappointed Pravin Gordhan four days later to the position that he held from 2009 until 2014, after pressure from political and business leaders.
Still, an ongoing spat between Gordhan and the head of the country’s revenue authority, as well as concerns over continuity, are adding to unease.
In the two days after Nene was replaced, the Johannesburg Stock Exchange lost 170 billion rand ($11.8 billion) and bonds and the rand plummeted, making the currency the third-worst performer in 2015 among 24 emerging markets tracked by Bloomberg. The rand was little changed at 14.3986 per dollar by 12:55 p.m. in Johannesburg on Thursday.
Fuzile has won respect from economists and investors as he’s implemented a spending ceiling and steered South Africa’s budget during a period in which the rand has halved in value against the dollar and its sovereign credit-rating was downgraded to the brink of junk status. The nation risks losing its investment-grade status with Standard & Poor’s due to review its BBB- assessment, which is one level above junk, in June. Moody’s Investors Service put its assessment, which is one step higher, on review for a downgrade last month.
“At this stage where we are facing a possible downgrade to junk status, this is
exactly what we need,” Isaac Matshego, an economist at Nedbank Ltd., said by phone on Thursday. “You must take into account that market players and these rating agencies are quite familiar with Mr. Fuzile and he is familiar with them too. He knows what they need and how to appease them.”
The Finance Ministry will make an announcement “as soon as we’re finished on government processes,” it said in e-mailed response to questions on April 21. “It’s a cabinet thing so cabinet is the only one that can speak on it,” Treasury spokeswoman Phumza Macanda said by phone on Thursday. Fuzile declined to comment on April 19. He didn’t immediately respond to phone calls and a text message seeking comment on Thursday.
The cabinet next meets on May 11, government spokeswoman Phumla Williams said by phone, adding that she is unaware of the agenda.