The Zuma effect: Nene’s sacking & the markets

Economists have warned the effect the move has had on markets should not be underestimated.

President Jacob Zuma in Parliament. Picture: GCIS.

JOHANNESBURG - As trade unions and the South African Chamber of Commerce and Industry calls on President Jacob Zuma to explain why he fired Finance Minister Nhlanhla Nene, economists have warned that the effect the move has had on the markets should not be underestimated.

On Thursday, banking shares dropped by more than 10 percent to levels last seen after the 2008 global financial crash.

This has been attributed to bond yields which increased after Zuma's announcement.

Sasfin market analyst David Shapiro says the effect of the president's announcement on the economy has been similar to the effect the Lehman Brothers' bank shut down.

"Don't underestimate what this means. Don't underestimate the hardships that a rand at 15,30 or 15,40 is going to bring to us. It's going to tipple the economy into a recession."

Standard Bank Wealth and Investments' Chris Hart says there has to be strict policy against excessive spending.

He says the banking sector was hit hard due to the bond yields.

"The financial services sector was hit very hard because they have to hold these government bonds in their balance sheet as part of regulation."

Zuma has not indicated if he intends on explaining his decision, despite calls for him to do so from within the Tripartite Alliance and the investment community.

LISTEN: Black Like Me founder Herman Mashaba comments on the sacking of Finance Minister Nhlanhla Nene