South African President Jacob Zuma spooked local currency and commodity markets on Friday after he replaced a well regarded finance minister with a virtual unknown. The rand and commodities plunged on the news.
South Africa's rand slumped to a record low on Friday as the country's economic prospects darkened over President Jacob Zuma's unexplained 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.
"Nene was not prepared to be used as Mr Zuma's own petty cashbox," said Ian Cruickshanks, chief economist with the South African Institute of Race Relations.
"Foreigners are getting assets out," he said. "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)."
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.
Plucked from obscurity, van Rooyen appears never to have governed anything bigger than a municipality, although he does have a master's degree in finance (economic policy) awarded by the University of London through its distance learning programs.
Still, van Rooyen is seen as likely to back huge outlays on a nuclear station building program and the troubled state airline as well aspublic spending ahead of local elections next year – fiscally dubious programs that his predecessor was blocking.
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.
'... (Zuma's move) will now go down in history as one of the costliest blunders...'
His time as a small-town mayor is partly 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.
Van Rooyen acknowledged he had "a colossal assignment" ahead of him and added, "I will endeavor to ensure every policy is directed at creating favorable investment conditions that will lead to the development of South Africa for all South Africans."
Market analysts remained unimpressed. Peter Attard Montalto of Nomura said van Rooyen’s comments failed "to (even) try and calm the markets."
bik/gb (AFP, Reuters, dpa)