Mark Kingon was appointed acting head of South Africa’s tax office on Tuesday, hours after President Cyril Ramaphosa suspended his predecessor and days before a Moody’s review that could see the country lose its last investment-grade credit rating.
The move was seen as a signal of intent to ratings agencies and investors that had lost faith in Africa’s most developed economy under former leader Jacob Zuma. It follows a cabinet reshuffle which sacked or demoted several allies of Zuma, who was forced to step down by the ruling ANC last month.
Ramaphosa suspended Zuma-appointed Tom Moyane late on Tuesday, saying he had failed as head of the South African Revenue Service (SARS) and had lost the confidence of taxpayers.
Kingon, SARS chief officer for business and individual taxes, was announced as acting commissioner on Tuesday.
Mindful that investors who finance its big budget and current account deficits have lost confidence in South Africa, Ramaphosa has begun to reform the economy and state-owned companies like power utility Eskom and South African Airways.
A test of whether his early changes have helped shift sentiment will come on Friday when credit rating agency Moody’s completes a review that could see it downgrade South Africa’s local and foreign debt to “junk” status.
“This (Moyane’s suspension) is a clear sign to Moody’s that strong steps are being taken to turn financial institutions around,” said Joon Chong, partner in Webber Wentzel’s Tax Practice. “We may avoid a downgrade by the skin of our teeth.”
Rating agencies Fitch and S&P both demoted South Africa from investment-grade last year as economic growth slowed and public finances deteriorated.
Moyane, who was appointed in 2014, had been criticized by SARS employees and members of the ruling African National Congress after the tax agency missed revenue collection targets and faced allegations of corruption and mismanagement.
In last month’s budget the Treasury said it faced a 48.2 billion rand ($4 billion) revenue gap in the current 2017/18 fiscal year, partly due to SARS missing its collection target.
Moyane was not available for comment on Tuesday. He has repeatedly defended his record and had the support of Zuma.
But Ramaphosa said he had lost faith in his leadership.
“The disrepute in which you have brought the SARS and the government as a whole and the risk to the national Revenue Fund are enormous,” Ramaphosa said in a March 19 letter informing Moyane of his suspension that was seen by Reuters.