South Africa’s President Jacob Zuma sends rand tumbling to record low with sack of finance minister

In a November 25 article on South African business and finance news platform Fin24, Solly Moeng described South Africa’s Nhlanhla Nene as a minister, who unlike his colleagues, understands what needs to be done and is serious about accomplishing it. However, he seemed to have gone too far when the National Treasury which he heads, intervened to prevent lossmaking national airline, South African Airways (SAA), from rearranging a deal with Airbus spearheaded by SAA chair Dudu Myeni , a friend of President Jacob Zuma, who also chairs the president’s foundation. But that was not the only offence noticed; Nene has also been a stumbling block in the financing of a nuclear power plant the president wants to build. Mr Zuma seems to have had enough and has now sacked the Finance Minister.

“I have decided to remove Mr Nhlanhla Nene as Minister of Finance, ahead of his deployment to another strategic position,” Zuma said in a statement.

“Mr Nene has done well since his appointment as Minister of Finance during a difficult economic climate,” the president added.

The result of Zuma’s announcement; a plummeting rand which has now reached new lows, dropping as much as 5.7 percent against the dollar. The rand traded at more than R15 on Wednesday following the removal of Nene who is known to rein in government spending as the South African economy continues to struggle.  Possible monetary policy tightening in the U.S also spells doom for the already weak currency.

Last Friday, Fitch downgraded South Africa’s credit rating to BBB-, owing to the poor state of the economy, while Standard & Poor’s changed the outlook on its BBB- rating to negative from stable, taking the nation a step closer to junk status.

There are several other related issues; South Africa’s current-account deficit widened to 4.1 percent of gross domestic product in the third quarter, unemployment remains high and South African investors are moving their money out of the country at the fastest pace ever. Pessimism is high in the country as political and economic uncertainties continue. Nene’s sack is expected to worsen this.

Zuma has appointed ruling party ANC member of parliament, David Van Rooyen, as the new Minister of Finance.

Van Rooyen served as the Whip of the Standing Committee on Finance and as Whip of the Economic Transformation Cluster.