Agencies/Pretoria
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%, 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 (ANC) 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 (SAA) to renegotiate a plane-leasing deal with Airbus.
Nene, who was appointed in 2014, has also criticised 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.
Nene’s removal came less than a week after South Africa was moved closer to “junk” status by rating companies, which highlighted growth predicted at a sluggish 1.4% this year, and rising interest and inflation rates.
Falling commodity prices have also added pressure to the country’s key mining sector.
“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 well-being of the country. We have a president who cares very little about the damage caused by his actions.”
The rand dropped more than 5% after Nene’s removal, hitting a record low of 15.3857.
Yesterday afternoon, it was trading at 15.18 to the dollar.
“Mine is a colossal assignment coming at a time when the global economic outlook is not favourable, 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.”
Mmusi Maimane, leader of the main opposition Democratic Alliance party, said that Nene’s sacking “has everything to do with his criticism of parastatal companies (like SAA).”
“Zuma has proven he’s a president ready to destroy the economy for his own game,” he said.
The sacking and the financial fallout hit a raw nerve with some ordinary South Africans. “With the rand getting battered like this, firing Nene is not the right move,” said Dominic Ratau, a 74-year-old pensioner and lifelong ANC loyalist, expressing his dissatisfaction with Zuma.
“I’ve been an ANC supporter because of the older generation who were running the party. But this guy is leading the country to disaster. He’s allowed too much corruption.”
Zuma, a former Robben Island prisoner alongside Nelson Mandela under apartheid, came to power in 2009 when he was hailed as a charismatic, down-to-earth leader.
But his rule has been tarnished by corruption scandals and growing anger among young South Africans that the benefits of the post-apartheid era has only been enjoyed by small elite within the ANC.
He has often blamed the country’s economic woes on the legacy of white-minority rule that ended in 1994, and the global decline in prices for platinum, gold, coal and other mineral resources.
Zuma is due to stand down in 2019, with deputy president Cyril Ramaphosa and Nkosazana Dlamini-Zuma, Zuma’s former wife and the head of the African Union commission, leading the field to succeed him.
South Africa’s President Jacob Zuma congratulates new Finance Minister David van Rooyen during a ceremony at the Union building in Pretoria yesterday.
