Goldman Sees South Africa Own Goal as Zuma Move Hits Bank Stocks

  • Shock firing of finance minister sends bank shares tumbling
  • Bank stocks are `proxies for growth' in emerging markets

Colin Coleman, partner and head of Goldman Sachs Group Inc. in South Africa, said the country may have inflicted another wound upon itself as bank stocks plunged Thursday after President Jacob Zuma fired the finance minister.

“To drive higher economic growth South Africa has to stop scoring own goals, and some market commentators feel that the timing and manner of Minister Nene’s removal is in effect an own goal,” Coleman said in an interview at Bloomberg’s Johannesburg offices on Thursday.

The banking index on Johannesburg’s stock market slumped as much as 12 percent, the most since October 2001, after Zuma removed Nhlanhla Nene as finance minister late Wednesday, without giving any reasons. His replacement, David van Rooyen, a lawmaker little known to locals or investors, was sworn in on Thursday. The rand dropped as much as 5.4 percent against the dollar after Zuma’s announcement, the biggest decline since September 2011, reaching a record low.

The slump in stocks underscores that “banks in emerging markets are proxies for gross domestic product growth prospects,” Coleman said. Even so, “South African banks have been remarkably resilient” in the past two years as expansion in Africa’s most industrialized economy slows and the related prospect of rising bad-debt levels increases, he said.

Nene’s sudden dismissal and any changes to government’s commitment to fiscal discipline in the future may cause South African companies to accelerate corporate activity such
as balance sheet restructuring, domestic consolidation and capital raising, said Coleman. Companies may also may increase the pace of investment in developed m
arkets as a way to continue to diversify risk, he said. 

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