Ray Mahlaka
2 minute read
31 Mar 2017
1:46 pm

Gordhan recall scares foreign investors off, trillions lost in potential borrowings

Ray Mahlaka

Reveals government planned to raise R600m this week…only amassed bids worth R200m.

The recall of former finance minister Pravin Gordhan from an investment roadshow, along with his former deputy minister Mcebisi Jonas and several business leaders, may have potentially scuppered trillions in borrowings to SA.

In a press briefing hours after Gordhan and Jonas were fired, the former revealed that meetings were held with “50 to 60” investors, who collectively control US$5 trillion in funds.

President Jacob Zuma has replaced Gordhan with former home affairs minister Malusi Gigaba and Jonas was replaced by Sfiso Buthelezi. Read more here.

The US and UK roadshow, that was cut short by Zuma on Monday, was intended to drum up foreign investment in South Africa. Zuma has yet to officially give reasons why he cut the investment roadshow short.

On Friday, Gordhan revealed that the potential borrowings may now have been jeopardised, as a result of uncertainty created by the recall of the investment delegation.

“This means that the cost of borrowing debt by the government will now be higher,” said Gordhan.

The removal of Gordhan comes after South Africa narrowly escaped a downgrade to junk status, with rating agencies Fitch and Standard & Poor’s placing the country’s sovereign rating one notch above junk. Moody’s placed SA two notches above junk.

Gordhan said the work to allay the jitters of rating agencies has “not being undone.”

“Any undoing of confidence would hurt ordinary South Africans. All of us should work to get ratings to remain in investment grade. We need to convince rating agencies that we are in the right direction.”

The rand continued to extend its losses, breaching the R13 level to the US dollar at 21:10 on Thursday. The local unit plummeted to R13.38 against the US dollar at 12:25 on Friday from an intra-day low of R12.80 at 17:40 on Thursday.

SA ten-year government bonds yields jumped from 8.28% on Monday, to a high of 8.94% after the recall of Gordhan from an investment roadshow. But bonds, which are about 30% held by foreign investors, have since retreated to 8.88 at 12:10%.

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