Cape Town - The rand tanked on Friday afternoon following a report about President Jacob Zuma considering firing ministers who defy him.
Bloomberg, quoting unnamed senior leaders of the ruling African National Congress (ANC) following the party’s National Executive Committee (NEC) meeting this week, said that Zuma is considering taking action.
Zuma reportedly also said that government needs to improve its performance.
The two leaders attended the gathering in Johannesburg and declined to be named because they’re not authorised to comment, Bloomberg reported.
The NEC meeting was called to discuss ways to boost the economy, improve access to land and contain rising public impatience with a government that is not meeting its targets to fight poverty and reduce a 27% unemployment rate.
The rand was trading 1.5% weaker at R13.53/$ shortly after the comments were published. This follows after the rand broke through a significant level of R13.30/$ earlier this week, and traded at levels last seen in late 2015.
A number of economists and analysts have held the view that the rand could show more resilience this year and that currency volatility would be less than in the recent past.
But utterances - such as Zuma's threats to dismiss his detractors - could cause renewed uncertainty in the exchange rate environment.
Ministers in Zuma's target
Cabinet members who could face the axe include Tourism Minister Derek Hanekom who proposed a motion of no confidence in Zuma at an NEC meeting late last year, asking Zuma to step down. His bid was allegedly supported by Health Minister Aaron Motsoaledi and Public Works Minister Thulas Nxesi who may also be in the firing line.
Talks about an imminent Cabinet reshuffle have been rife for some time. The move would give Zuma an opportunity to get rid of Finance Minister Pravin Gordhan with whom Zuma has had a number of differences of opinion, such as the management of state-owned enterprises and the affordability of a nuclear build programme.
“The relationship between Zuma and his finance minister is untenable,” Ralph Mathekga, a political analyst at the Mapungubwe Institute for Strategic Reflection, a Johannesburg-based research group, told Bloomberg by phone on Friday.
“You cannot have a treasury minister that does not toe the same line as the head of cabinet.”
A dismissal of Gordhan could send renewed shock waves through financial markets as had happened when Zuma replaced former Finance Minister Nhlanhla Nene with lesser known Des van Rooyen, an ANC back-bencher at the time.
The Nene firing, dubbed 9/12, caused the rand to fall more than 8% against the dollar over a three-day period, while stocks and government bond prices plunged.Read Fin24's top stories trending on Twitter: Fin24’s top stories