Zuma gives no reason for Nene decision

President Jacob Zuma shocks investors by firing Finance Minister Nhlanhla Nene only a few months before the Budget.

Johannesburg - The rand staged a massive collapse last night as it plunged to a fresh record low against the US dollar after President Jacob Zuma shocked investors yesterday by firing Nhlanhla Nene as Minister of Finance.

Zuma gave no reasons for the move and appointed ANC MP David Van Rooyen, who is the whip of the standing committee on finance and a whip of the economic transformation cluster, to replace him.

Zuma said Van Rooyen was a former executive mayor of Merafong municipality and a former North West provincial chairman of the South African Local Government Association.

At about 8pm, just before the announcement was made by Zuma, the rand was quoted at R14.58 to the US dollar.

The news of Nene’s departure caused the rand to weaken by 80c to a record low of R15.3857 before firming to R15.0813 by 9.10pm.

“I wish Mr Van Rooyen all the best in this new appointment. The new deployment of Mr Nene will be announced in due course,” Zuma said.

George Glynos, the managing director and chief economist at ETM Analytics, said he was taken aback by the decision to replace Nene with Van Rooyen, who Glynos said lacked any credibility among investors.

Glynos said the sudden decision to sack Nene could hasten further downgrades to South Africa’s credit rating.

“The rand is going to be blasted. It is a laughable decision. Investors don’t like nasty surprises and hate uncertainty. There is no line of sight on fiscal policy now. Money is like a coward and where it feels unsafe it gets withdrawn,” he added.

“South Africa needs a steady hand at the national Treasury,” Glynos said.

Blow to sentiment

The change of finance minister and the way it has been done is likely to hurt already low business confidence.

The Rand Merchant Bank (RMB)/Bureau for Economic Research (BER) business confidence index released last month showed that business sentiment retreated further in the fourth quarter of the year, reaching its lowest level in five years as activity in the retail, new vehicle trade and manufacturing sectors slowed.

Earlier this month, the Merchantec chief executive confidence index reported a record low since its inception in 2009.

The speculation yesterday was that Nene’s removal was related to the infighting at SAA, which has fallen under the National Treasury.

In particular, Nene, who took over the ministry from Pravin Gordhan in May 2014, has been at loggerheads with SAA board chairwoman Dudu Myeni, who is known to be close to Zuma.

Another reason for Nene’s exit could be last week’s downgrade of South Africa’s sovereign credit ratings by Fitch to one level above investment grade and Standard & Poor’s lowering its outlook from stable to negative, which means the country is close to junk status.

In an unprecedented move, Nene wrote to Myeni last week, instructing her to implement an Airbus transaction in line with the approval that he had already granted.

Nene gave the SAA board until December 21 to conclude the agreement to swop the purchase of 10 A320s for a lease of five A330s from Airbus.

Nene said the swop should be communicated to Airbus and the agreement be reached without further discussion.

“A copy of the agreement signed by both parties (SAA and Airbus) is to be shared with my office within 24 hours of it being concluded,” Nene wrote in a letter.

“I will not entertain any further discussions or applications relating to amending the transaction’s structure,” he wrote.

Nene’s strongly worded letter to Myeni comes in the wake of deteriorating relations between him and the SAA board on the Airbus swop deal.

In his letter, Nene said he stood by his earlier assessment that severe negative consequences would arise should further delays result in Airbus reverting to the existing A320 purchase agreement that was currently in place.

BUSINESS REPORT