Sacking of finance minister moves south Africa

South Africa’s rand dropped to historic lows
Thursday 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 percent,
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 African debt was moved
closer to “junk” status by rating
companies, which highlighted growth
predicted at a sluggish 1.4 percent this
year, and rising interest and inflation
rates.
Falling commodity prices have also
added pressure to the country’s key
mining sector.
“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.”
The rand, which has declined sharply
during the year, dropped a further five
percent immediately after Nene’s
removal, hitting a record low of 15.3857
to the dollar.
Late Thursday afternoon, it was trading
at 15.31 to the dollar.
– ‘In a crisis’ –
“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, told AFP.
“That is a very irresponsible thing to do.
“It sounds like a personal decision, not a
decision meant for the wellbeing of the
country. We have a president who cares
very little about the damage caused by
his actions.”
Mmusi Maimane, leader of the main
opposition Democratic Alliance party,
told AFP 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.
Fitch Ratings issued a statement saying
Nene’s firing “increases uncertainty
about fiscal policy and contingent
liabilities from state-owned companies.”
“The (personnel) change would be
relevant to our sovereign rating
assessment if it led to a loosening of
fiscal policy,” it added.
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.