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Rand plummets following Nene’s ‘redeployment’

The rand touched record lows against the dollar, pound and the euro.

Finance Minister Nhlanhla Nene delivers his 2015 Budget Speech held in the National Assembly, Parliament, Cape Town. 25 February. Picture: GCIS.
Nhlanhla Nene,Nhlanhla Nene removed as the finance minister,Finance Minister Nhlanhla Nene
Local Business Politics

JOHANNESBURG – As investors, analysts and politicians tell of their shock at the sacking of Finance Minister Nhlanhla Nene, the rand has fallen to R15 to the dollar while there’s still no explanation from the Presidency about why he has been fired.

On Wednesday night, President Jacob Zuma released a statement saying Nene was being redeployed, but he hasn't said where the now former minister is going.

He is being replaced by former Merafong Mayor David van Rooyen.

The local currency also touched record lows against the pound and the euro. 

Nene’s surprise removal comes at a time when the already battered currency is at risk of further losses ahead of a possible interest rate hike by the US Federal Reserve.

The rand, along with other emerging market currencies has also been hit by a continual fall in commodity prices.

For the moment, Nene has not commented on his firing while the ANC has said it believes van Rooyen will be able to provide the necessary leadership to the National Treasury.

LISTEN: Social media reacts to Zuma's cabinet reshuffle with #ZumaMustFall

INVESTORS, ECONOMISTS REACT

International investor at Nomura, Peter Attard Montalto says it's because there is some important symbolism in this announcement by the president. 

Econometrix chief economist Azar Jammine says this is a decision that is going to hurt South Africans, by making them poorer.

“The fall in the rand implies higher inflation. It enhances the likelihood that the Reserve bank will now have to increase interest rates, and if it doesn’t do so, we will end up with a massive higher inflation situation.”

Other economists say the real problem here is the timing, as it comes just as ratings agencies are warning we could soon be reduced to junk status.

There’s no official explanation as to why Nene has been moved, but last week he told South African Airways (SAA) Chair Dudu Myeni she could not go ahead with a particular deal with Airbus.

UDM leader Bantu Holomisa says that's the spark behind this move.

Meanwhile there are also questions about why van Rooyen has been appointed as the new finance minister.

Political analyst Somadoda Fikeni says the fact he is not seen as experienced in financial issues is going to strengthen perceptions that this is about Myeni.

“One is not surprised, given that the proximity of the chair of SAA to the president is well documented.”

LISTEN: Finance Minister Nhlanhla Nene recalled - Economist Commentary on #NightTalk

WHO IS DAVID VAN ROOYEN?

Van Rooyen is a former Umkhonto we Sizwe (MK) operative and member of anti-apartheid movements such as the Khutsong Student Congress and the United Democratic Front (UDF).

According to the ANC, he graduated with a Masters in Economic Policy from the University of London last year and he also holds diplomas in Advanced Business Management and Municipal Governance.

His highest positions include the national whip of the finance portfolio committee and the North West head of the South African Local Government Association (Salga).

But it is his tenure as mayor of Merafong in 2009 that's caused concern about his leadership style.

Residents there chased him out of the township after burning his house and accused him of trying to move the Merafong Municipality from Gauteng to the North West.

(Edited by Tamsin Wort)

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