South Africa's rand slumps to a record low after President Jacob Zuma's unexplained firing of the respected finance minister
Johannesburg - Arab Today
South Africa's rand slumped to record lows for a second day on Friday as the country's economic prospects darkened over President Jacob Zuma's firing of the respected finance minister.
The rand breached 16 to the US dollar for the first time, government bond yields rose and bank stocks dived further in reaction to Nhlanhla Nene being dismissed late Wednesday.
Nene was replaced by David van Rooyen, a little-known figure from the ruling African National Congress (ANC) party, in a move greeted with dismay by many investors and financial analysts.
But late Friday Zuma explained the shock ouster for the first time. He said Nene had been nominated as South Africa's candidate to head the African Regional Centre of the newly formed BRICS bank.
"We are fully backing his candidature, knowing full well that he will excel and make the nation proud in his next assignment," said a statement.
Zuma said Nene's departure "does not signal a change in the government’s fiscal stance."
"Government will not abandon the fiscal path that we have chosen in the last few years. Maintaining a prudent fiscal position remains one of government’s top priorities," it said.
But economists were not so convinced.
"Nene was not prepared to be used as Mr Zuma's own petty cashbox," Ian Cruickshanks, chief economist with the South African Institute of Race Relations, told AFP.
"Foreigners are getting assets out. There are lots of uncertainty, the only solution to protect the exchange rate of the rand is an intervention by the Reserve Bank (raising interest rates)," he said.
South Africa, the continent's second largest economy, is struggling with unemployment stubbornly high at over 25 percent, low growth and the threat of a credit rating downgrade to "junk" status.
The rand has lost about 30 percent of its value against the dollar this year -- falling 8.0 percent alone since Nene was removed.
His fate and the market reaction unleashed a bout of deep pessimism in South Africa over ANC rule which has dominated politics since Nelson Mandela won the first post-apartheid elections in 1994.
Van Rooyen is seen as likely to back huge outlays on a nuclear station building programme and the troubled state airline as well as public spending ahead of local elections next year.
Nene's "ouster will now go down in history as one of the costliest blunders ever made by the current administration," said Ellis Mnyandu, editor of Business Report newspaper.
"The shock announcement... was devoid of any logic and justification, especially when (Zuma's) government is meant to be doing everything possible to restore confidence and growth.
"His successor, David Douglas Des van Rooyen, is a big unknown."
Van Rooyen, 47, was a member of the ANC's armed wing in the last years of its struggle against apartheid, and has recently been a low-key member of parliament's finance committee.
His time as a small-town mayor of Merafong is primarily remembered for when his house was burnt down by a mob over provincial boundary changes that local people thought would disadvantage them
He resigned the post in 2009, according to local media.
Zuma, who led the ANC to an easy general election victory last year, holds the presidency until 2019.