President Jacob Zuma’s surprise ‘removal’ of highly respected Nhlanhla Nene as the Minister of Finance has shocked economic analysts and sent the rand plummeting to record lows against the major international currencies.
Zuma issued a statement on Wednesday night in which he announced that ANC veteran Des van Rooyen would take the reins from Nene as the new head of Treasury.
The shock of the message was clearly visible in the sharp drop in the exchange rate. On Thursday morning the rand traded at R15.08 against the dollar, R16.58 against the euro and R22.86 against the pound. The JSE opened lower, but quickly recovered to trade 0.34% higher at 9:45am.
In his statement Zuma said: “I have decided to remove Mr Nhlanhla Nene as Minister of Finance, ahead of his deployment to another strategic position. Mr Nene has done well since his appointment as Minister of Finance during a difficult economic climate.”
Zuma did not announce which portfolio Nene would be redeployed to. The South African president also did not give any reasons for Nene’s removal.
This turn of events follows a highly controversial announcement by the National Treasury to reject proposed changes to the deal it had negotiated between national carrier SAA and aircraft manufacturer Airbus last week.
SAA chairperson Dudu Myeni, a close ally of Zuma, proposed the changes to the deal and Nene said in his explanation of the rejection that it would leave the already beleaguered SAA in a worse financial position.
Nene’s removal also follows last week’s credit rating downgrade by ratings agency Fitch.
Several South African political commentators and economists reacted in shock to the announcement.
Roelof Botha, economist and faculty member of the Gibs Business School, said: “The one portfolio where a company requires stability, consistency and the highest standards of corporate governance is National Treasury.”
He said Zuma’s decision to remove Nene will impact credit ratings, the exchange rate, investor sentiment and bond yields, which will impact on fiscal stability. “To remove a Minister of Finance without any obvious good reason is a point of grave concern and international investors will certainly frown on this decision.”
Goolam Ballim, chief economist at Standard Bank, said government “will have to give a sound explanation why the decision was taken to remove a pragmatic finance minister at a time when South Africa is probably at its lowest in 20 years in terms of credible policy making.”
He said that both the National Treasury and the Reserve Bank are credible national pillars of South Africa’s broad institutional breath. “The unceremonious removal of Nene therefore challenges the general underpinnings of South Africa’s policy-making foundations.”
Des van Rooyen
David Douglas Des van Rooyen, who takes the reins from Nene, is an ANC veteran. According to several websites he was an MK operative and held various leadership positions in Congress of South African Students, the United Democratic Front and the National Union of Mineworkers. Between 1994 and 2007 he held various leadership positions within the ANC.
According to the People’s Assembly website, Van Rooyen holds a Masters Degree in Public Development and Management and a MSc Finance (Economic Policy) from the University of London.
Zuma said in his statement that Van Rooyen currently serves as a Whip of the Standing Committee on Finance and Whip of the Economic Transformation Cluster.
He is a former Executive Mayor of Merafong Municipality and a former North West provincial chairperson of the South African Local Government Association.
Twitter erupted with the news.
After all, there are about three years until Zuma's presidential term ends. I guess another round of looting continues. #Nene
— Ray Mahlaka (@RayMahlaka) December 10, 2015
— Ranjeni Munusamy (@RanjeniM) December 10, 2015
— Jacaranda News (@JacaNews) December 10, 2015
— Dr. E.B MALAPANE (@falling_fly2) December 10, 2015
— Philippe Burger (@PhilippeBurger) December 10, 2015
— Leon Schreiber (@Leon_Schreib) December 10, 2015
— Evidence Mabasa (@E_xcelsior) December 10, 2015
— Hanna Barry (@hanna_barry) December 10, 2015
— Olaf Brinkmann ® (@olafbrinkmann) December 10, 2015
— David Ansara (@DavidAnsara) December 9, 2015
Van Rooyen's first public address needs to be one of Merkel proportions. If the market is anything to go by, investors need assuring. #Nene
— Kaveer Beharee (@UbiquityZA) December 10, 2015
I am very, very concerned about the unexplained removal of Minister Nene
— Jonathan Jansen (@JJ_UFS) December 9, 2015
#NhlanhlaNene is the third minister to stand against Dudu Myeni at SAA and fall.
— Justice Malala (@justicemalala) December 9, 2015
So Nhlanhla Nene has been fired! Hope there no connection with a strong stance he took on SAA saga – can't help but speculate about that
— Zwelinzima Vavi (@Zwelinzima1) December 9, 2015
6 days ago #Nene warned Myeni's SAA against proceeding with Airbus deal or any other without approval. Nene? Who's Nene?
— Antoinette Slab (@AntoinetteSlabb) December 9, 2015
So Zuma removes Nene as finance minister at a time when continuity is most needed. I don't have the words…next stop 'junk'?
— Sean Ashton (@SashtonSean) December 9, 2015
!!! Zuma has removed Nene as finance minister https://t.co/K8TIuRcvRn. A watershed moment. Zuma cannot help himself. He is a disaster.
— Adrian Saville (@AdrianSaville) December 9, 2015
Spare a thought for Mcebisi Jonas right now…SA: Whose country is it anyway? Where the rules are made up and merit doesn't matter #Nene
— Michael Avery (@MichaelJAvery) December 9, 2015
How did the president overlook the deputy finance minister, director generals etc…? How will policy certainty be maintain now? #Nene
— Gugulethu Cele (@gugumfuphi) December 9, 2015
Finance Minister Nene fired. Know what that means? SA junk status next, nuclear deals. SAA bankrupt. Rand 20:$. How about "impeach Zuma now"
— Cees Bruggemans (@ceesbruggemans) December 9, 2015
— Travis Robson (@Travis_Robson) December 9, 2015
— CapeTalk (@CapeTalk) December 9, 2015
With two years to go before the duck is lame, is this the frenzy of end of term looting we see? #Nene
— Ferial Haffajee (@ferialhaffajee) December 9, 2015
Spare a thought too for the principled, capable men & women #Nene leaves behind in Treasury. They will now be under unbearable pressure.
— Lionel Faull (@LionelFaull) December 9, 2015