President Jacob Zuma views the fact that the Public Investment Corp (PIC) lost R99bn within 48 hours after the sacking of former finance minister Nhlanhla Nene in December last year as a “normal” economic phenomenon.
The Democratic Alliance’s shadow minister of finance, David Maynier, asked Zuma if he would reconsider a previous statement that the markets had overreacted and people had exaggerated following the impact of his decision to replace Nene with little-known ANC MP David (Des) van Rooyen.
Maynier’s question came after PIC CEO Daniel Matjila admitted to parliament in May that the asset manager, one of the largest in Africa, had lost more than R100bn within 48 hours after the removal of Nene on 9 December. The funds were subsequently regained when the rand stabilised.
According to Matjila, the Government Employees Pension Fund lost R95bn, the Unemployment Insurance Fund lost R7bn and the Compensation Fund lost R3bn, while other funds forbore R1,2bn following “9/12″ — the day Nene was briefly replaced with Van Rooyen as finance minister.
“However, beyond two days we’ve seen a significant recovery,” Matjila said in response to questions from MPs on 10 May about its investment mandates and details about the entities and companies it invests in.
In January this year, Zuma said the markets overreacted when he replaced Nene and people “exaggerated” the situation. He insisted that it had been the right decision to appoint Van Rooyen.
In response to Maynier’s question, Zuma wrote that the currencies of countries that have international trade linkages are “contagiously linked to both domestic and global temporal events”.
“This is called incidence of speculative attacks. South Africa is no exception.”
According to Zuma, global and domestic events and shocks in November and December had a negative impact on the rand.
Global factors included the “oil price, figures from China and US interest rates”.
Zuma acknowledged that domestically the “sovereign downgrading of South Africa in December and changing of the minister of finance” impacted the local currency’s exchange rate.
“The latter incident caused a spike in the rand and within three days, the rand recovered back to the pre-9 December 2015 levels,” he said.
About the PIC’s temporary R99bn loss, Zuma said the loss and subsequent recovery of the money are “normal occurrences in speculative global and domestic attacks”.
He believed the government showed commitment to grow the economy by implementing the National Development Plan and that markets “continue to show resilience”.
“Our efforts of galvanising government, business and labour to work together to implement the nine-point plan and implement critical reforms are proving to be a solution in fast-tracking growth in the economy.”
South Africa’s economy contracted by 1,2% in the first quarter of 2016, while the International Monetary Fund revised the country’s growth prospects downwards from 0,6% to 0,1%.