Gigaba was in on it, Fuzile wants out

Finance Minister Malusi Gigaba confirmed to Moneyweb on Tuesday morning that he did know about the decision by Standard & Poor’s to downgrade South Africa’s foreign currency credit rating to junk.

South African sovereign public debt amounts to R2.2 trillion. R220 billion of this debt is denominated in foreign currency, including euros and US dollars. It is this portion that is now classified as junk. South Africa’s rand-denominated debt retains its investment grade credit rating.

Following a suggestion from a bond manager we spoke to ahead of the press conference, Moneyweb asked the minister if – as per protocol – Standard & Poor’s had informed him 48 hours before the decision was to be made public about the downgrade. He confirmed as such, and indicated he knew as early as Friday that the decision had been made.

“When I walked into the office on Friday, they had already made their decision. They did afford us the courtesy of notifying us. We felt, at that point, it was not necessary to talk to them as they had already made their decision, but we will meet with them shortly. The reason I did not take you into my confidence with regard to the decision by S&P is because they had also taken me into their confidence. And so, I could not undermine the courtesy with which they had accorded me.”

This makes sense. S&P follows this protocol so that governments affected by these decisions can prepare for them. Imagine a situation where a finance minister was to take leave and the country became informed of a downgrade while he was on holiday… That would be embarrassing and unfair to the officials concerned.

He would also not be drawn on what was discussed in the conversations with the other two ratings agencies over the weekend. Gigaba was not in a position to inform us as to who was advising him in his new role.

In response to the question about what he intends to do to prevent other ratings agencies (Moody’s and Fitch) from following a similar course of action, minister Gigaba said he would be leading a delegation of organised business and labour to go and engage with the agencies. He also, once again, underlined the government’s commitment to addressing rising debt.

But another cruel sucker-punch to any chance of bouncing back quickly from the downgrade, or indeed, preventing more from taking place came on Tuesday afternoon. Bloomberg reported that Treasury director-general Lungisa Fuzile had informed finance minister Pravin Gordhan last week Wednesday that he would like to take leave of Treasury by the end of next month.

Read: Treasury DG said to have asked to leave post

Fuzile has been at Treasury for nearly 20 years in various capacities. He probably has more institutional knowledge of the department than any former minister.

In an odd way he signalled something was up on Saturday when, at Gigaba’s first press conference, he spoke of how taxing he found the role, and said he thought it was impossible to sustain for periods longer than seven years.

“You cannot be in this role for too long; you travel a lot, you have got to be on top of way too many complex issues. I have to read complex memoranda on my desk and have to burn midnight oil and spend weekends going through it. We know why people would prefer absolute stability but I am pleading for mercy. I have done six years as DG, my predecessors did seven.”

His potential loss, when taken with the loss of minister Gordhan and deputy minister Jonas, represents a cataclysmic setback for continuity and the smooth operation of Treasury.

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