In December last year, President Jacob Zuma announced the removal of Finance Minister Nhlanhla Nene from the Finance portfolio in Cabinet.
“I have decided to remove Nhlanhla Nene as Minister of Finance, ahead of his deployment to another strategic position,” Zuma said in a statement.
Zuma said that Nene had done well since his appointment as Minister of Finance during a difficult economic climate. Zuma has appointed ANC member of parliament, David Van Rooyen, as the new Minister of Finance.
Van Rooyen served as the Whip of the Standing Committee on Finance and as Whip of the Economic Transformation Cluster.
He was also a former executive mayor of Merafong Municipality and a former North West provincial chairperson of the South African Local Government Association. “The new deployment of Nene will be announced in due course,” Zuma said.
Politicians reacts
Politicians from various opposition parties took to Twitter on Wednesday night to express their disapproval of President Zuma’s decision to remove Nene.
Democratic Alliance leader Mmusi Maimane said the axing of Nene could open the door for a new jet, the nuclear deal, SA Airways and many others who had a “unfunded mandate”.
“O swenkele [you are showing off] Jacob Zuma you will never come alright. Harsh lesson for Min of Finance Nene,” he tweeted.
“What we need now is a finance minister who will demonstrate fiscal discipline and stand up to Pres, focus on growth for jobs,” he said in another tweet.
Economic Freedom Fighters leader Julius Malema tweeted: “A declaration of a crises indeed, his party must now remove him. #ZumaMustFall.”
United Democratic Movement leader Bantu Holomisa also took to Twitter, saying: “#MinisterNene removed from the cabinet. His sin: He dared 2 touch SAA & refused JZJet. @N_Kwankwa.”
He accused government of losing its direction and being morally and intellectually challenged. Western Cape premier and former DA leader Helen Zille expressed shock at the move.
“What? Finance Minister Nhlanhla Nene fired by Zuma? He did not take instructions. That’s why. Now watch the economy crash. #Zumanomics,” she tweeted.
In another tweet, she said Zuma did not understand the depth of the crisis he had unleashed.
Former Congress of the People and ANC leader Mbhazima Shilowa tweeted: “I know the guy who’s the new Finance Minister. He was a Mayor when I was Premier. He was a disaster hence he’s removal 2 years ahead of 2011.”
Watch video below for more:
Markets react
Local and international markets also reacted aggressively to the axing of the “capable” Nene, according to TreasuryOne.
International markets have displayed their disapproval as the rand lost 80 cents against the dollar, 90c against the euro and 110c against the pound, said TreasuryOne director Wichard Cilliers.
“Since the start of December, the rand has had a torrid time as the perfect storm has developed,” Cilliers said.
Year-to-date the rand has lost over 30% of its value against the greenback.
By 12:30 the rand was at R15.11/$ in volatile trade. The local unit was trading at R22.93 against the British pound and at R16.55 against the euro.
On the JSE, financial services companies and specifically banks, felt the brunt of the news that President Jacob Zuma on Wednesday removed Nene from the Finance portfolio in Cabinet.
Nedbank [JSE:NED] lost 7.74% to R184.99, Standard Bank [JSE:SBK] gave up 7.21% to R113.55, Capitec [JSE:CPI] was down 3.85% at R549.99 and FirstRand [JSE:FSR] lost 5.8% to R42.91.
Sanlam [JSE:SLM] lost 8.01% to R52.82, Discovery [JSE:DSY] 7.91% at R124.78.
Nene was replaced by largely unknown David van Rooyen. Economists believe Nene was abruptly removed from his post for political reasons, including his reluctance to fund the R1trn nuclear programme, his inquiry into the squandering of funds at the SABC and his ruling against SAA in negotiations with Airbus.
Van Rooyen served as the Whip of the Standing Committee on Finance and as Whip of the Economic Transformation Cluster.
Cilliers described Van Rooyen as “a complete outsider with no experience in Treasury”.
Last week South Africa was downgraded by ratings agency Fitch and put on negative watch by S&P. According to Cilliers a move to junk could now be accelerated by the latest Cabinet reshuffle.
He predicted that the rand would be on the back-foot on Thursday, as large foreign portfolio outflows were expected from the bond and equity markets as the market digested the news.
“Data releases are minimal and focused on the US initial jobless claims and BOE interest rate decision, this will, however, remain irrelevant as today’s trade will revolve around Nene,” he said.
“The rand and South Africa are in for rough ride before things will go better.”
Independent treasury specialist to corporates, Adam Phillips of Umkhulu Consulting, told Fin24 on Thursday it looks like there was some two-way business around the R15.00-level.
“It now looks like the foreign players are in, as it has moved up from 14.93 back to 15.10. You have to ask yourself, would you bring money back into ZAR even at these levels?”
Phillips said the timing of the announcement was a real shocker. “Yesterday it looked like we were going to get some traction in the ZAR as the EUR continues to stay bid before the Fed meeting next week. The ZAR is really out at sea on its own at the moment. Land seems very far away at this stage.
“If offshore bond investors come it could take the currency to even dizzier heights,” said Phillips.
Economists Chris Hart spoke to SABC’s Morning live show about the effect of Nene’s removal:
Nene resigns
Early this year, Nene announced that he felt it was “proper” for him to resign as an ANC MP.
This following his name being put forward to head the African Regional Centre of the New Development Bank/Brics bank.
“Yes, I resigned last year,” he confirmed.
“In line with my removal [and being nominated for the Brics bank position] I felt it would be the proper thing to do.”
While he resigned in December, his resignation was processed only last month.
After Nene’s sacking as finance minister, President Zuma said the “urgency of the changes in the leadership of the National Treasury” was because nominations needed to be sent to Shanghai in terms of the head of the African Regional Centre of the New Development Bank/BRICS Bank, which will be based in Johannesburg”.
“Nene is our candidate for this position. We are fully backing his candidature, knowing full well that he will excel and make the nation proud in his next assignment,” Zuma said at the time.
Nene said no formal offer has yet been received. “Whatever comes, comes,” he said, adding that he looked forward to taking up the position for which he was nominated.
Nene was replaced with largely unknown David van Rooyen, who was put in the seat for four days and was replaced by Pravin Gordhan.
– By SABC /News 24
