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SA rand drops after finance minister’s sack
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South Africa’s rand dropped to historic lows yesterday after President Jacob Zuma sacked his respected finance minister in a move that triggered widespread fears about the country’s economic outlook.
South Africa has faced mounting financial problems in recent years, with unemployment at over 25 percent, slowing GDP growth and power cuts hobbling industry.
Zuma fired Nhlanhla Nene late Wednesday without giving any reason, and replaced him with David van Rooyen, a little-known lawmaker from the ruling Africa National Congress party.
“We view this as profoundly negative,” Peter Montalto, an analyst at Nomura, said in a scathing criticism of the president.
“The removal of a technocratically sound, decent, hardworking, well respected, fiscally conservative and reform-minded finance minister is a serious blow.”
Montalto said Nene’s surprise sacking appeared to be because he publicly slapped down a move by state-owned South African Airways to renegotiate a plane-leasing deal with Airbus.
Nene, who was appointed in 2014, has also criticized the affordability of a nuclear plant building programme.
Both projects are seen as being controlled by Zuma loyalists, who are regularly accused of using their influence to benefit from government contracts.
Junk debt status
Nene’s removal came less than a week after South African debt was moved closer to “junk” status by rating companies, which highlighted growth predicted at a sluggish 1.4 percent this year, and rising interest and inflation rates.
Falling commodity prices have also added pressure to the country’s key mining sector.
“Mine is a colossal assignment coming at a time when the global economic outlook is not favorable, especially for emerging markets,” van Rooyen said after being sworn in.
“All economic indicators are pointing to the south,” he added, vowing to attract investment “leading to the development of South Africa for all South Africans, not for the few.”
The rand, which has declined sharply during the year, dropped a further 5 percent immediately after Nene’s removal, hitting a record low of 15.3857 to the dollar.
Late yesterday afternoon, it was trading at 15.31 to the dollar.
“We are in a crisis, and (Zuma) decides to get rid of the finance minister, and replace him with somebody without any experience,” Dawie Roodt, economic analyst at Efficient Group, said. “That is a very irresponsible thing to do.
“It sounds like a personal decision, not a decision meant for the wellbeing of the country. We have a president who cares very little about the damage caused by his actions.”
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