SA President Jacob Zuma on Wednesday removed Finance Minister Nhlanhla Nene from his post, after the rand tumbled to a record low in the wake of the latest downgrade of the country’s credit rating.
“I have decided to remove Mr Nhlanhla Nene as Minister of Finance, ahead of his deployment to another strategic position, the president said in a statement on Wednesday evening.
Zuma said Nene — South Africa’s first black finance minister — would be replaced by African National Congress backbencher David van Rooyen, the whip of Parliament’s standing committee on finance, who also serves as whip of the economic transformation cluster.
“Mr Nene has done well since his appointment as minister of finance during a difficult economic climate. Mr Nene enjoys a lot of respect in the sector locally and abroad, having also served as a deputy minister of finance previously,” Zuma added.
Nene was appointed as Finance Minister in May last year and succeeded Pravin Gordhan.
South Africa’s investment grade credit rating is under serious threat after a downgrade last Friday and it could struggle to fund crucial infrastructure projects and help put the economy on a more robust growth path.
On Friday, Fitch ratings agency downgraded the rating of Africa’s most industrialised economy by one notch to BBB-, the lowest investment grade category. It cited the slowing economy and rising debt.
Standard & Poor’s kept its own rating at BBB- but lowered the outlook to negative from stable, saying it believed economic growth might be lower than the 1.5 percent forecast by government.
The downgrade is expected to see government struggle to raise funding for critical infrastructure projects, including electricity utility Eskom’s build programme.
It sent the rand to a record low against the dollar on Monday and saw Royal Merchant Bank (RMB) warn of a high risk the country was heading to a downgrade to junk status — the grade at which international bond portfolio managers refuse to own debt — in 2016.
Statistics released earlier on Wednesday showed that South Africa’s headline consumer inflation rose 4.8 percent year-on-year in November, compared with 4.7 percent in October. This was largely in line with expectations but, against predictions, failed to firm the rand.
The currency was trading at R14.62 against the dollar just before noon. As news of Nene’s departure broke, it fell to R14.94 to the dollar and 22.6 to the pound.
Democratic Alliance leader Mmusi Maimane called Nene’s dismissal “reckless” and noted that it had only added to the rand’s downward spiral.
“Tonight’s firing of Nhanhla Nene has already had profoundly negative effects on the rand which has plummeted since news of the announcement broke. This is sure to make the plight of the unemployed in South Africa even more difficult,” Maimane said.
He added that Van Rooyen’s appointment “provides no assurance that our economy is in safe hands”.
Nene in recent months faced added political pressure in the form of a perceived stand-off with the chairwoman of embattled national carrier South African Airways Dudu Myeni — who is seen as being close to Zuma — as she sought to renegotiate a sensitive leasing contract with Airbus.
Last Thursday, Nene vetoed the controversial plan and ordered SAA to stick to the original terms of the agreement which converted an onerous purchase into a contract to lease five A330-300 aircraft.
The finance ministry added a stern warning to SAA that should it conclude a deal with Airbus or anybody else without its approval, it would be in breach of the Public Finance Management Act.
Meanwhile, the ruling African National Congress said it respected the decision by Zuma and added it believed Van Rooyen “has what it takes to lead the Ministry”.
“We believe his experience and tenure as the ANC National Assembly Whip for both Finance Portfolio Committee and ANC Caucus’ Economic Transformation Cluster will enable him to provide the necessary leadership in the department.”