Their greatest test will be to convince markets that their appointments are not just part of the long-running factional battles in the governing party.
“He’s coming in with a very tarnished image and he is filling very big boots,” said Wits economist Lumkile Mondi.
Gigaba and Buthelezi are unknown to financial markets. The pair and Des van Rooyen – during his brief stint as finance minister – represent a break from the tradition of appointing Treasury insiders. Predecessors Gordhan and Jonas and Treasury director-general Lungisa Fuzile have years of experience in the system.
Their surprise appointments in Thursday’s cabinet reshuffle cost the country dearly as the rand depreciated sharply against the dollar and other major currencies, the value of bank equities plunged and traders mostly spurned a government bond issue on Friday. In his new role, any blunder by Gigaba will have a wide and cascading effect on every South African’s life.
The rand weakened more than 8% this week to its lowest level since early February.
For the most part, the market is unlikely to throw caution to the wind and more likely to treat Gigaba with suspicion. He holds a degree in pedagogics from the University of Durban-Westville.
Buthelezi, a former chairman of the Passenger Rail Agency of South Africa, has a masters degree in commerce.
Gigaba’s poor record as public enterprises minister precedes him. Under his watch, governance collapsed at state-owned enterprises SAA, Denel and Eskom.
SAA’s board has been mired in controversy while led by Dudu Myeni, whose close links to President Jacob Zuma came under scrutiny when he insisted on her reappointment despite Gordhan’s attempts to replace her.
Gigaba’s blunders with border-post birth-certificate requirements nearly cost the labour-intensive tourism industry, which attracts foreign money.
At Eskom, he partly presided over the period of rolling blackouts that cost industry millions of rands and created an energy-supply vacuum noticed by international credit ratings agencies.
Mondi said the market would monitor Gigaba’s handling of Myeni’s contract, up for renewal later this year, and whether he approves a new bank aligned to the Gupta family.
His treatment of an application to have the court decide what role the Treasury should play in a squabble between the banks and Gupta firm Oakbay will also be watched.
“[By] how he reacts to that we’ll judge him. We’ll judge him harshly should he be seen to make things easier for Oakbay.
“But if he continues on the path of transparency he’ll earn a lot of respect from us,” Mondi said.
Mayihlome Tshwete, who is the spokesman for Gigaba, could not be reached for comment.
Iraj Abedian, director of Pan-African Investment and Research Services, said: “The real impact will come when he starts interacting with the market, when he starts making policy, when he makes decisions that are not based on perceptions but his actual presentation of his fiscal stance.
“This is just the beginning. This is not the end of this process. “The market’s initial reaction is through the volatility of the currency.”
However, said Abedian, Gigaba will have to be judged on his new portfolio rather than those in the past. “That was when he was young and his first appointment as minister. One cannot judge him today by his history.
But, “if he continues on that trend of disrespect for governance, disrespect for fiscal prudence, he will be punished badly”.
This punishment would come in the form of debt at unfavourable interest rates.
The impact is already visible. On Friday, the Treasury launched a R600-million bonds issue, but investors subcribed for only R200-million, Gordhan said at a press conference.
Banking Association of SA MD Cas Coovadia said: “It’s unbelievable. Our bond issues are usually oversubscribed.”
Abedian expected market reticence to continue if Gigaba failed to instil confidence in his ability to act independently of political interference.
“Unless he comes up with a very different level of talk and depth of understanding and not just spin-doctoring, but showing real commitment followed by his actions, the market is going to continue going from bad to worse, and government finances will [fall] short.”
Mcebisi Ndletyana, associate professor at the University of Johannesburg, said Gigaba’s was seen as a political appointment.
“There was a time when Gigaba’s character was beyond [reproach], but then he just made a turn towards bad behaviour at some point. His character is questionable, so that questions whether he can do the job appropriately. It means he is prone to misconduct.
“He is there to do what Jacob Zuma wants. In the past he has done exactly that by attacking [former political prisoner Ahmed] Kathrada,” he said.
Adrian Saville, chief strategist at Citadel said: “Put bluntly, confidence in Gigaba’s leadership at the Treasury is likely to be low, given his insipid performance as minister of public enterprises and the visa fiasco that transpired under him as minister of home affairs. He is widely regarded to be a Zuma loyalist.
“As such, his appointment represents a direct risk to the institutional strength and fabric of the Treasury and the maintenance of fiscal discipline that is Gordhan’s hallmark.”
Fitch ratings agency senior director Jan Friederich said: “Zuma’s cabinet reshuffle signals a change in policy direction and will raise political tension within the ANC and its traditional allies, potentially weakening public finances and standards of governance.”
Moody’s Investors Services said fiscal and economic policies were an important factor in its assessment of a country’s credit profile. “We will closely monitor any potential policy implications of this recent development.”
– Additional reporting by Lutho Mtongana and Pericles Anetos