Because of one wrong decision, it is said that President Jacob Zuma has put the South African economy to a more damaging situation comparing it to the rise of the global financial crisis that took place in 2008. This is in line with the decision of the president to fire his current finance minister, Nhlanhla Nene.
As a result, South African’s rand has dropped to a new record. About 3 percent lower in the sell-off by most investors following the dismissal of Nhlanhla. The banks stocks also led to drop.
The firing of the current minister Nhlanhla Nene last Wednesday was in favour for David van Rooyen. This newly elected official is an unknown lawmaker. Thus, more investors are quite in doubt of doing another investment to the ailing economy given that its status is already unstable.
Nene is a veteran civil servant that has been serving the ministry for quite some time. He stood to lead the government spending in Africa’s most profit-making economy. The dismissed official has also ignited the sell-off in banks, which has now dropped to almost 20 percent since Thursday.
A lot of economist has been questioning the ability of the new finance minister regarding its ability to work with the economy. If he can make the economy steady given that, it is now on the verge of downfall. Prices of the commodity exports ranging from coal to gold are shaky and that the public spending is getting out of control.
Cratos Capital equity analyst Greg Davies said, “Markets don’t like uncertainty”. He also added that whom president Zuma dismissed is someone that has been a credible minister when it comes to marketing. Nhlanhla Nene was fired without any given explanation and was replaced by someone who seems to have no idea or enough background about the work of a finance minister.
As of 1300 GMT the rand hit 2.8 percent lower compared to the dollar, which is around 15.8900, is edging back to the crucial 16.00 level after some time of recovery. Regardless of all the happenings, the central bank told the Reuters that it will still pursue and hold its monetary policy committee meeting this coming January as scheduled.
However, the analysts have speculated that the bank may call an early meeting than scheduled in order to protect the rate of the rand. The bank has reached the target rate twice this year at the same month to 6.25 percent. The current standing of the rand compared to dollar is quite challenging but they are still trying to manage everything.
As the new finance minister took place, more and more investors are in doubt of his capabilities. The local investors as well as the foreign ones are having these thoughts. The fund manager from Korner Perspective even said, “If you were going to design a terrible period to fire a minister, this is the perfect time. It is a real tragedy”.