South Africa’s President Jacob Zuma fired the country’s Finance Minister Nhlanhla Nene and replaced him with a little known lawmakers late on Wednesday, a move that shocked South African markets and triggered a sell-off that pushed the rand above R15 per dollar to a new record-low.
Zuma said in an emailed statement that David Van Rooyen, who served as a member of the finance committee in Parliament, will take Nene’s position barely two years after he was appointed.
Nene, who took over the finance ministry from Pravin Gordhan in May 2014, after Zuma secured a second five-year presidential term, will be “deployed to another strategic position”.
“The new deployment of Mr Nene will be announced in due course,” Zuma said.
The South African rand reacted immediately by plunging 5.4 percent against the dollar, its biggest decline since September 2011 according to Bloomberg data, to hit an all-time-low of 15.3857. It however recouped some ground later.
Nene’s removal was one of Zuma’s late-night Cabinet shuffle and sent shock waves through the political system and among investors and the reaction was mostly negative. This is the second time in three months he has changed his ministers.
Nic Borain, political analyst at BNP Paribas, told Bloomberg the axing of Nene will be interpreted in financial markets as the Presidents response to Nene attempting to hold the line on fiscal discipline, in particular refusing to give in to demands made by South African Airways (SAA) chairwoman Dudu Myeni, or on Zuma’s “preposterous pet nuclear project”.
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“This is a shock, coming so close to the recent downgrades of our debt. This will be interpreted in the worst possible light by markets,” Borain said.
“The reaction will be swift and harsh. For some time, financial markets have been concerned about the build-up of pressure on Nene, who is widely considered to have done an exceptional job in difficult circumstances.”
The cabinet shakeup is the latest shock to an economy hit by plunging metal prices on the international markets.
Earlier in December, Global rating agencies Fitch and Standards & Poor’s (S&P) cut South Africa’s Economy credit standings to just a level above junk status as the country struggles with an array of both external and internal factors.
Investors have been moving their money out of South Africa at the fastest pace ever as the country’s outlook worsened and a possible interest rate increased in the US looms next week.
A China-led commodity rout this year could also leave the economy, which narrowly avoided a recession during the third quarter, growing at the slowest pace since 2009, according to country’s central bank forecasts.