South Africa’s currency weakens after finance minister fired

South Africa’s currency fell close to a record low against the dollar on Thursday morning as the markets were digesting the news.

It however slipped again to below R15/$ in overnight trade in NY, with the unit last trading at R15,03 against the dollar. “Nene’s removal undermines that dramatically”, said Nedbank political analyst JP Landman.

The Banking Association of South Africa said Nene’s removal is “very concerning”.

“The reaction will be swift and harsh”.

Investors have taken fright at Wednesday’s abrupt dismissal of Nhlanhla Nene, a veteran public servant who had won their respect for his fiscal prudence and attention to detail.

The government’s gross exposure to foreign currency loans is less than 10 per cent of total government debt. “This will be interpreted in the worst possible light by markets”.

“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, told AFP. “I will be surprised if the view is favourable”.

The EFF said Zuma appointed Van Rooyen because the new minister “will not stand up to him when he wants to do wrong things”, and because Nene “refused illegal instructions from Zuma and his friends in both business and state-owned enterprises”.

Many investors fear that Zuma may be eyeing a government grab of private assets, particularly after the announcement of large-scale layoffs from struggling mining companies.

“Questions will be asked of Mr Nene’s replacement”. To introduce an unknown person now implies uncertainty for the investment community. “We simply can not have that”. “The markets are not going to like this”.

“The BBC accepts the prerogative of the president to decide on the composition of his executive”. “We noticed this shift significantly in the last few days”.

Van Rooyen now serves as a Whip of the Standing Committee on Finance as well as the Whip of the Economic Transformation Cluster in Parliament.

Fitch downgraded South Africa’s economy to just one notch above sub-investment grade last Friday.

South Africa’s president, Jacob Zuma, removed Nene, who had been in the post for less than two years, late on Wednesday, giving no explanation. Mosiuoa Lekota, president of the Congress of the People party, criticized the timing of the move. There are rumours the strategic position Zuma mentioned in sacking Nene is a job at the Brics bank, but this is neither confirmed, nor logical.

As you can read in today’s commentary on Zuma’s firing of Finance Minister Nhlanhla Nene by the influential Financial Times of London, this rash move is interpreted as a sign of serious trouble. The spiral could get even more vicious. Some responses give President Jacob Zuma the benefit of the doubt, others see it as a symptom of a bigger problem that needs to be resisted. It also took on the treasury, saying it is controlled by “neoliberal hardliners”.