CRISIS CONTROL: Finance Minister Malusi Gigaba holds  a media briefing in Pretoria in response to Moody's credit rating  downgrade on June 9  Picture: MOELETSI MABE
CRISIS CONTROL: Finance Minister Malusi Gigaba holds a media briefing in Pretoria in response to Moody's credit rating downgrade on June 9 Picture: MOELETSI MABE

IN the fewer than 100 days since taking office, Finance Minister Malusi Gigaba and his deputy Sfiso Buthelezi have measured up to the proverbial new broom sweeping clean.

But hardly had they begun to rearrange the furniture when their past began to catch up, catapulting the pair and the Treasury into the spotlight for all the wrong reasons.

Gigaba is implicated in the scandals emanating from e-mail leaks that have exposed the depth of corruption and state capture played out across the government over several years.

Earlier this week he confirmed the authenticity of documents linking him to the alleged irregular approval of naturalisation for the influential Gupta family, who are from India. Gigaba insisted that the application was handled according to procedure that required the Department of Home Affairs to submit recommendations to the minister of home affairs for consideration.

In a statement issued by the Treasury, he said the granting of naturalisation certificates was not unusual as similar courtesies had been afforded to businessmen, executives and sports people before. "It is therefore unfortunate that the focus of the nation is diverted towards spurious sideshows when the country is faced with massive economic challenges."

Graphic: RUBY-GAY MARTIN
Graphic: RUBY-GAY MARTIN

At an impromptu press conference on Thursday, after he had cancelled a briefing on Monday upon being summoned to Luthuli House by the ANC, Gigaba again claimed a campaign had been waged against him since his appointment following the surprise midnight cabinet reshuffle on March 31.

He said the campaign included attacks on his late father, whose citizenship was being questioned, and on his wife, who was being vilified over her spat on social media with his former mistress.

Gigaba and Buthelezi both welcomed an investigation by the public protector into the e-mails, with Buthelezi saying: "I'm not guilty of anything."

Buthelezi's credibility has also been called into question by reports of a Treasury recommendation that he be criminally charged for alleged irregular conduct during his term as chairman of the troubled Passenger Rail Agency of South Africa.

The Treasury investigated 216 Prasa contracts between 2012 and 2015. Only 13 were found to be above board.

Buthelezi had been Prasa's chairman for six years before resigning in December 2014.

Dondo Mogajane, the new director-general of the Treasury, said at the briefing it had commissioned forensic audits of all contracts worth R10-million and more. A particular report on an IT tender recommended that the executive authority at Prasa be held accountable. However, "At no point are we saying the deputy minister should be charged."

The finance duo have had a baptism of fire since their surprise appointment after President Jacob Zuma had axed former finance minister Pravin Gordhan and his deputy, Mcebisi Jonas. By the time that he was fired, Gordhan's relationship with Zuma was at breaking point, while Jonas had said that the Gupta family, with close ties to Zuma, had tried to bribe him.

In the week after the new duo's appointment, Fitch Ratings downgraded the country's foreign and local currency credit ratings. S&P Global Ratings - the largest global ratings agency - downgraded the foreign rating and warned there was a possibility it could downgrade the country at the next assessment in December if there was no significant change in political uncertainty and weak economic growth.

Moody's Ratings earlier this month dropped its foreign currency rating a notch, which still leaves the country at investment grade on Moody's scale, but the outlook is negative. Moody's is likely to review its assessment later this year.

The barrage of bad publicity Gigaba and Buthelezi have faced has created concern over the impact on the Treasury.

Their jobs are complicated further by the breakdown in trust with business, which is critical to plans to resuscitate the economy. Labour, business and the government, led by Gordhan, worked together for 18 months to avert credit downgrades, which was undone in an instant.

Business confidence has plummeted to levels last seen in the 2008-09 recession, according to the Rand Merchant Bank-Bureau for Economic Research survey published this week.

Earlier in the week, Gigaba pleaded with the business community to disregard headlines and "asked that we judge him on his actions and not on what we hear and read", Jabu Mabuza, chairman of the CEO Initiative, said after a meeting with Gigaba.

Bonang Mohale, newly appointed Business Leadership South Africa CEO, said: "It's not up to us to trust the finance minister; the finance minister needs to prove that the words he's been saying [are] followed by the deeds. So far, the actions that he has taken give us hope.

"He is saying all the right things, he has signed and gazetted the Fica Bill, he has stopped a number of things that we thought were really standing in the way of progress."

Mohale added: "We have said to the new finance minister, 'You have made the right noises. We are watching what you are going to do. You are going to be judged by your actions, not just by your opinions.'"

He declined to comment on allegations about Gigaba's conduct as home affairs minister, where he presided over a visa process that nearly crippled the tourism industry and was later scrapped. But Mohale did add that an independent judicial commission of inquiry was necessary to clear the minister's and deputy minister's names.

Thabi Leoka, economic strategist at Argon Asset Management, said: "The difficulty with having this dark cloud over the two most senior people in the Treasury, especially at a time just after the reshuffle" and the downgrades by S&P, Fitch and Moody's, "is that we have the minister and deputy minister out there to prove to investors that they are in control, that they are able to turn things around and to also instil some sense of confidence in the market".

Leoka said that before the leaks, the only challenge was the extent to which they were able to gain the market's confidence and show that "they are the right people for the job".

"Now, with the leaks, it puts a question out there as to whether they are the right people for the job and whether they have the right intention for the job" and how the leaks would affect their daily work to stabilise and continue fiscal policy. "Even though they have reassured us that they will be adopting the same policies, there has always been this scepticism about their ability to do so," she said.

Data from Vestact show that for more than 20 months foreigners have sold South African equities. There has been an outflow since August 2015.

JSE and Morgan Stanley data, however, show that there has been growth in foreign ownership of South African debt in recent months from investors seeking higher yield.

Foreigners had bought a net R49-billion of government debt between February and April 2017, while local investors had sold R17-billion over the same period.

But junk status increases borrowing costs for the government.

Gigaba said the Treasury was concerned about demand at the bond auctions at which the government raised funds, and the Treasury was talking to asset managers. Asset managers were concerned about growth, strength of governance at state-owned enterprises, and contingent liabilities.

Leoka said: "The revelation is that [Gigaba and Buthelezi] are working against multiple forces, whereas before it was just working against the fact that they are new ministers.

"One would have argued that the market is treating them unfairly because they are yet to prove themselves, but now you have this lingering question of the e-mails."

She added: "So what are we to believe? They haven't cleared their names in court."

Lawson Naidoo, executive secretary of the Council for the Advancement of the South African Constitution, said: "One can look at the minister of finance but one must also look at the other cabinet ministers that are similarly implicated in the Gupta e-mail leaks."

The onus was on the government and the president to initiate action to enable ministers to confront the allegations properly, Naidoo said. "It would be difficult to imagine any other country that proclaims to be a constitutional democracy, as we do, that such a scandal would have broken that would not have seen at the very least those implicated resigning. In some cases it might have brought down the whole government."

Reuel Khoza, former Nedbank chairman, declined to comment on Gigaba and Buthelezi specifically but said: "If the encoder of the message has source credibility issues, the message suffers. Whoever wants to build relationships with key stakeholders, they are starting on a major back foot."

In terms of a value systems, leaders should embody integrity and strive to behave in a manner that was seen to be beyond reproach, Khoza said.

"The current leadership is not even trying. They are beyond embarrassment. They are totally incorrigible and impermeable to national criticism. Once you get to that stage it doesn't matter what you say to the international and local public, your message can't reach the desired audience with effect because you have no credibility."

Additional reporting by Roxanne Henderson

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