Despite Market Jitters, ANC Rallies Around South African President Jacob Zuma

South Africa's President Jacob Zuma at Parliament in Cape Town on February 19, 2015. Mike Hutchings/Reuters

JOHANNESBURG (Reuters) - South Africa's ruling ANC rallied round President Jacob Zuma on Tuesday, rejecting calls for him to stand down after he rocked financial markets last week by appointing an unknown backbencher as finance minister.

Zuma appointed David van Rooyen, a former mayor, to replace the widely respected Nhlanhla Nene last Wednesday, a move that sparked a selling frenzy in the rand, bonds and stock market. But he changed his mind late on Sunday and reappointed former finance minister Pravin Gordhan to the post he held from 2009 to 2014.

The dramatic U-turn caused a relief rally in South African assets. But it also fueled speculation that the ruling party might make the 73-year-old relinquish the reins of power because of the damage done to Africa's most advanced economy.

However, spokesman Zizi Kodwa said top officials in the African National Congress (ANC), Nelson Mandela's erstwhile liberation movement that has ruled since the end of apartheid in 1994, had not contemplated such drastic action.

"I can confirm that there was no discussion of recalling the president," he told a news conference.

Ratings agency Moody's cut its outlook on South Africa's sovereign credit rating to negative from stable, citing the increased probability that economic growth will remain low for a prolonged period of time.

It also said there was a growing risk of fiscal slippage from both slower growth and increasing political pressure in the country. It reaffirmed the rating itself at baa2.

The Nene fiasco came as the ANC prepared for May local government elections in which it is likely to face stiff competition from the opposition Democratic Alliance and the leftist Economic Freedom Fighters, especially in urban areas.

ANC deputy secretary-general Jessie Duarte said Zuma had decided to change van Rooyen's appointment on Sunday afternoon after a 70-minute meeting with top party officials, including deputy president Cyril Ramaphosa.

"The change has been made and that action has been taken to rectify what we believe really caused a bloodbath in the economy," Duarte said.

The party had not anticipated such a severe reaction from the markets to Nene's departure, she added.

The rand shed 9 percent against the dollar in the two days after van Rooyen's appointment and banks lost more than 15 percent on worries South Africa's sovereign credit rating could slip into "junk" territory.

Zuma also considered the views of the party's allies in the union movement, as well as the concerns of the financial community, Duarte said.

Top bankers, including the local head of U.S. investment bank Goldman Sachs, met senior ANC officials at the weekend to lobby for an appointment that would help restore calm and confidence to South Africa's markets, Duarte said.

The rand firmed to 14.9575 against the dollar on Tuesday, a gain on the day of 1 percent, but still short of recapturing all the ground lost after Nene's shock exit.


Separately, Zuma appeared relaxed and unfazed after a meeting in Pretoria with church leaders who had demanded an audience to express their concerns about Nene's sacking. The talks were "honest and frank", Zuma told reporters.

Several senior ANC figures have come out to demand Zuma consider his position, while thousands of ordinary South Africans have taken to social media to express their frustrations under the hashtag #ZumaMustFall.

Even though Zuma, who has been at the helm since 2009 and won a second five-term last year, appears to have weathered the immediate storm, some analysts say his days might yet be numbered if the ANC fares badly in next year's elections.

"We think recall or a managed exit is now only possible after the May elections next year, assuming no 'mass' uprising particularly of the black working classes," Nomura emerging markets economist Peter Attard Montalto said.

On Wednesday, a public holiday, the civil society group Unite Against Corruption has organised a protest march to Pretoria's Union Buildings, the seat of government, to press its case that Zuma step down.

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