OPPOSITION parties reacted with horror, the rand weakened to record lows and bank share prices plunged after President Jacob Zuma fired finance minister Nhlanhla Nene.
Zuma’s surprise appointment of ANC MP David van Rooyen as finance minister saw the rand slump — it fell 2,85% to R15,33 per dollar last Thursday afternoon and was at R15,42 last night (10 December).
Van Rooyen, who was sworn in at the Union Buildings, spoke of the enormity of his new job before he was re-assigned to the Co-operative Governance and Traditional Affairs on Sunday.
“As you are all aware, mine is a colossal assignment coming at a time when the global economic outlook is not favourable, more especially for emerging markets,” he said.
On the JSE, an index of the six major banks fell as much as 12% to levels last seen in the 2008 global recession. “All the banks are built on confidence — removing the finance minister isn’t good for the country’s confidence,” said Patrice Rassou, head of equities at Sanlam Investment Management.
The rand slid to R15,38 per dollar on Wednesday night, soon after the announcement of Nene’s removal.
Nene is being deployed to another “strategic position” that would be announced in due course.
The South African Chamber of Commerce and Industry wants Zuma to explain Nene’s removal.
“The unexpected removal of Nene … is of grave concern to the business sector, especially as it comes only days after the downgrade of SA’s credit rating to just one level above speculative grade or junk,” the Association of Savings and Investment South Africa said. FNB analyst John Loos told The Witness the removal of Nene does not impact consumers directly in the short term, but its impact on investor confidence was reflected in the weak rand. “Our currency is like the share price value of our country and it’s deteriorating,” said Loos.
Nene’s removal was criticised by some political parties. DA leader Mmusi Maimane said it was a “dangerous and reckless move” by Zuma.
UDM leader Bantu Holomisa believed Zuma’s relationship with SA Airways chairperson Dudu Myeni had a role to play.
“We know Nene was dressed down by this lady in an ANC study group for refusing to bail her out. It is the same morally challenged leadership that wanted to roll out a nuclear programme that Nene did not condone,” Holomisa said.
The EFF called the appointment of Van Rooyen “a sign of a serious pathological crisis in the leadership and direction of the country”.
EFF spokesperson Mbuyiseni Ndlozi described Van Rooyen as an “unknown, inexperienced, sophomore … with questionable political credentials”. Johan Kruger, deputy general secretary of the Solidarity union said: “Van Rooyen by no means has the experience and political and economic insight to solve the country’s financial and economic crises”. Kruger said a dark cloud also hung over Van Rooyen’s municipal management abilities.
Van Rooyen was mayor of the struggling Merafong Municipality in Gauteng — under his management Merafong received several successive qualified audit opinions that included non-compliance with regulations and legislation.
Economists believe Nene was removed from his post for political reasons, including his reluctance to fund the R1 trillion nuclear build programme, his inquiry into the squandering of funds at the SABC and his ruling against SAA in negotiations with Airbus.
Van Rooyen served as the Whip of the Standing Committee on Finance and as Whip of the Economic Transformation Cluster.
The move comes less than a week after credit-rating companies pushed SA closer to junk status, citing concerns over a weak economy and rising debt.
“Especially at this point in time, we can ill afford to antagonise international investors. An event of this magnitude can even be the catalyst for a credit-rating downgrade to junk status. It could lead to a complete loss of investor confidence in South Africa, which could push us into a recession,” said Mohammed Nalla, head of strategic research at Nedbank Group. The markets are worried about the possibility of another downgrade by credit ratings agencies and that it could increase the cost of funding for South African banks,” Old Mutual Investment Group analyst Neelash Hansjee said.
Former Finance Minister Pravin Gordhan was appointed as new minister of finance— Supplied.