Last year December, the rand was trading at R11.50 to the US dollar and this morning, the local currency was trading at R15.00 to the US dollar.
This sharp fall should be of concern to everyone, from foreign investors, government officials to men in the street, even more considering the impending drought the country is facing.
Rand slam. South Africa’s currency tumbles to new low below ZAR15, -23% this year, -50% over last 4 years: pic.twitter.com/obOE5e6t7b
— Jamie McGeever (@ReutersJamie) December 10, 2015
The shocking firing of Nene last night is poetically; the blowing off of the good and sweeping in of the unknown and infamous. The Former Premier of Gauteng made his views public about Nene’s successor.
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
— Mbhazima Shilowa (@Enghumbhini) December 9, 2015
The question that many political and economic analysts are grappling with is how long it will take before South Africa is downgraded to junk status by ratings agencies? Some predict immediate reaction after President Jacob Zuma shockingly fired Finance Minister Nhlanhla Nene.
Analysts and economics are now more certain that President Jacob Zuma is the wrong person to be steering the country forward especially during this time when the country is faced with economic headwinds.
The decision to fire Nene is one in many that has been worrying investors in the recent past; on the list is the running of parastatals like SAA, Eskom, and SABC and some ‘dodgy’ deals like the nuclear and the mooted acquisition of an expensive jet and the infamous ‘security’ upgrades at his Nkandla homestead. Former COSATU Secretary General Zwelinzima Vavi put it in a graphical way on twitter.
The list is growing: NPA, Hawks, SAPS, Intelligence, IEC, COSATU, ANCYL, SACP, SAA, SABC, ESKOM, PetroSA, DBSA, ANCWL, Treasury – next SA?
— Zwelinzima Vavi (@Zwelinzima1) December 10, 2015
All this is happening in a country that can’t afford bad decisions.
David Shapiro, deputy chairperson of Sasfin told CNBC Africa that the firing of Minister Nhlanhla Nene was a deep concern.
“[Jacob] Zuma is getting his way in firing a person like Nene and getting away with it,” he said.
No-one to blame but the president and his wilful supporters in this move https://t.co/miqcEGNpMu
— Bruce Whitfield (@brucebusiness) December 9, 2015
“My thoughts on Nene being fired—-are negative and very worrying; this comes at a time where last week we were given warnings by the international community in the form of ratings agencies about the outlook,” he added.
“At a time we need reform programmes and growth, we go ahead and fire our minister who is highly rated in the international community. This is chaos; this has nothing to do on moving the country forward, it’s just politics.”
Mohammed Nalla from Nedbank said the timing would cost South Africa in the immediate going to long term.
“The timing couldn’t be any worse; we are not far from ratings downgrade. The market speaks the loudest so on a day like today we might see kneejerk reactions,” said Nalla.
“It’s a slow drift in microeconomic prudence. It’s a slow deterioration in in micro economic variables and investors are asking if this is another example of institutional erosion,” he added.
(READ MORE: Zuma under fire for firing finance minister Nene)
“This helps to antagonise investors and worse being he is being replaced by someone from the left.”
Isaiah Mhlanga, Economist at RMB says there is not any better decision the president could have made after firing a competent minister.
“Its two months before the minister presents a new budget next year and if we see any change in debt matrices or expenditure that will spook markets and South Africa could be junk status before year-end next year,” he said.
“The question now is how much more damage can Zuma do and at what point are we going to see people like Cyril Ramaphosa will say I can no longer be associated with this,” he questioned.
Jannie Rossouw, Head of the School of Economics and Business Science at Wits University says: “The only logical reason why minister Nene has been removed is because of politics around SAA and the nuclear deal.”