The rand strengthened, leading gains among major and emerging-market currencies, and bonds rallied after South African President Jacob Zuma bowed to pressure and reversed a decision to appoint a little-known former small-town mayor as finance minister.
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In a statement on Sunday, the president said that after replacing Nene he had “received many representations to reconsider my decision”.
But the president said in a statement late on Sunday that his response was a democratic move that emphasized the importance of listening to the people and to respond to their views.
On Monday, President Zuma then replaced van Rooyen with Pravin Gordhan, who also held the position of Financial Minister from 2009 to 2014.
Credit agency Fitch downgraded South Africa on December 4, leaving the continent’s most sophisticated economy just one notch above “junk” status, and said on Thursday Nene’s firing “raised more negative than positive questions”. He adds that now that Gordhan knows that some of these blunders occurred during his term, he would perhaps work harder to ensure that they do not recur.
Mohammed Nalla, head of research at Nedbank Capital, said having a finance minister serve just two days did not bode well for South Africa’s reputation. The rand plummeted to record lows.
Following the appointment David van Rooyen, an A.N.C. lawmaker who has no experience in finance, the South African rand fell steeply against the dollar.
Economist Dawie Roodt told Fin24: “It isn’t about Gordhan or Nene or Van Rooyen”. But critics said the damage to South Africa’s reputation, and to Zuma, would be lasting.
The meeting was called to assess the party’s readiness for its 104 anniversary to be held in Rustenburg in 2016, and to also discuss the issue of Nene. Although Mr Zuma is unpopular among South Africans (a recent Afrobarometer survey found that trust in him had dropped by nearly half over the past four years), he has ensconced his powerful supporters within the ANC executive and key state institutions.
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Zuma, 73, faces the greatest threat to the country’s stability since taking office in 2009 after his decision to remove Nene injected fresh turmoil to an economy that was already being imperiled by a slump in commodity prices. The fact that Zuma capitulated to business leaders and colleagues in his own party will go some way toward assuaging investors’ concerns, according to David Cowan, an economist at Citigroup, the world’s biggest currency trader.
