Finance Minister’s removal worrying

It is widely believed Finance Minister Nene was fired yesterday because of his fiscal prudence and for political reasons. Among them are Nene’s disagreements over nuclear affordability and shareholder oversight of SAA. He is replaced by David van Rooyens, a member of the portfolio standing committee on Finance in Parliament without any experience in central or provinicial government.

This is rather to be seen as a serious erosion of the institution of the national treasury that accelerates the credit and ratings negative story. Previous assumptions around contingent liability risks and shareholder oversight of parastatals as well as fiscal consolidation in the medium run must now be re-examined. As such, this is negative move.

Over the past 10 years, the National Treasury has slowly seen the political space in which it operates contracting. This has happened with the change in ministers from Trevor Manuel to Pravin Gordhan and then Nhlanhla Nene, and especially on wider microeconomic policy issues. Core fiscal issues, however, have retained investor confidence and the Treasury has (until now) always had the ability to undertake (sympathetic) fiscal conservatism.

The removal of a technocratically sound, decent, hardworking, well respected (at home and abroad), fiscally conservative and reform-minded finance minister is a serious blow to (portfolio and corporate FDI) investors for several reasons.

In summary, it is to be seen what happens with the new minister and where Nene is redeployed. But this will add to investor perceptions that – with poor timing here and an uncertain choice of new Minister – the ANC is increasingly overlooking and disregarding the views of the market and investors.

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