Manuel and deputy finmin agree to serve under new leadership

South Africa’s markets suffered a hiccup on Tuesday, when the Presidency announced that fourteen key Cabinet members, including well-regarded Finance Minister Trevor Manuel, would resign.

The rand fell to R8,27 to the dollar, however it stabilised following an announcement from National Treasury that Manuel, and the deputy Minister, Jabu Moleketi, who also resigned, would be willing to serve under the new governmental administration.

Eleven Cabinet Ministers and three deputies tendered their resignations on Tuesday, many feeling duty-bound to step down, as they were appointed President Thabo Mbeki, who resigned on Sunday, after he was recalled by the ANC.

Initial reaction to the news of the numerous Cabinet resignations sent the South African rand tumbling by more than 2,5% and bonds dropped sharply, while the blue-chip JSE Top-40 index plunged over 4%.

However, by 15:00 the rand and bonds recouped some of their earlier losses. At the end of trading, the top-40 index closed down 3,98% to 22 794,14 points and the All-Share index lost 3,75% at 24 923,34 points.

Government bonds tumbled on news of Manuel's resignation, with the yield on the 2015 government bond surging 20 basis points to 9,12% before retreating to 8,94% at the close of business.

Newswire Reuters quoted a Johannesburg-based trader as stating that the JSE had also been hit by last-minute selling of some stocks in the auction, which takes place after the market has closed.

"It may be because of the public holiday tomorrow, there's a bit of position squaring. The risks of holding positions even overnight at the moment are so high, let alone over two days ... Who knows what the hell is going to happen in the US tomorrow," he said.

Fears that economic policies, which gave South Africa its longest period of economic growth may be unravelled, were set aside when the ruling party said that the Ministers who had indicated that they would serve under new leadership, would be asked to continue in their positions.

Fitch Africa and Middle East department director Veronica Kalema told Engineering News Online that although the uncertainty had increased and an immediate sell-off was to be expected, the South African institutions, and Treasury in particular, were “strong and could function and survive without Manuel”.

South Africa’s Fitch rating was BBB+, and Tuesday’s events were not likely to affect this sovereign rating.

“Uncertainty has increased, Manuel has been a key player in the past administration, and the resignation of half the Cabinet is not a small thing. The key issue is that the new administration must manage these uncertainties, and ensure that the transition is smooth,” said Kalema.

“The situation is still very fluid at the moment, so give it another six months and then everyone will know what is going on, and things will start to settle down,” she added.

Efficient Group chief economist Dawie Roodt stated that “things will keep on ticking along as they have been for some time, considering that Manuel introduced a number of strong structures and procedures at the Department of Finance in the last few years, and those structures and procedures will still be there”.

‘NO CRISIS’

The ANC said it wished to ensure continuity in government up to and beyond the 2009 election. “The ANC can confirm that there is no crisis,” said secretary-general Gwede Mantashe in a statement.

The seven Ministers who indicated they would continue to serve under a new president, and which the ANC has asked to do so, were: Manuel; Correctional Services Minister Ngconde Balfour; Public Service and Administration Minister Geraldine Fraser-Moleketi; Public Works Minister Thoko Didiza; deputy Foreign Affairs Minister Aziz Pahad; Moleketi; and deputy Correctional Services Minister Loretta Jacobus.

Six members of the executive confirmed their resignations, and indicated that they would not be available to continue in their positions under new leadership. These were: Deputy President Phumzile Mlambo-Ngcuka; Defence Minister Mosiuoa Lekota; Minister in the Presidency, Essop Pahad; Intelligence Minister Ronnie Kasrils; Public Enterprises Minister Alec Erwin and Provincial and Local Government Minister Sydney Mufamadi.

The ANC said it would move speedily to fill these vacancies once the new President has assumed office, and reiterated that the process of governance would continue as normal.

Parliament would appoint an acting president on Thursday, when Mbeki’s resignation would become official.

Mbeki he was told by the ANC to quit before the end of his term next year, after High court Judge, Chris Nicholson, inferred that there might have been high-level political inference in a corruption case against party leader Jacob Zuma.

In the case of Minister of Science and Technology Mosibudi Mangena, the ANC and his organisation, the Azanian People's Organisation would conduct further discussions.

Finance Minister Trevor Manuel; Public Enterprises Minister Thoko Didiza; Intelligence Minister Ronnie Kasrils; Science and Technology Minister Mosibudi Mangena; Public Services and Administration Minister Geraldine Fraser-Moleketi; Minister in the Presidency Essop Pahad; Deputy President Phumzile Mlambo-Ngcuka; Correctional Services Minister Ngconde Balfour; Defence Minister Mosiuoa Lekota;Local Government Minister Sydney Mufamadi; and Public Enterprises Minister Alec Erwin