South Africa: 3 finance ministers in 1 week hits currency

Pravin Gordhan
Newly appointed minister of finance, Pravin Gordhan, speaks during a news conference in Pretoria, South Africa, Monday Dec. 14, 2015. South Africa’s currency recovered at the news that an experienced finance minister has been reinstated, after the president abruptly replaced two finance ministers in less than a week. On Monday, the Business Day newspaper said the announcement to reinstate Pravin Gordhan, who served as finance minister from 2009 to 2014, saw the rand improve by 5 percent on Sunday evening, gaining a further 4 percent on Monday morning. (AP Photo)

JOHANNESBURG (AP) — In less than a week, South Africa has had three finance ministers.

Last Wednesday, Nhlanhla Nene was fired. On Thursday, David van Rooyen was sworn in. By Sunday, van Rooyen was out and Pravin Gordhan returned to the post he held previously. The rapid succession of finance minister caused the South Africa’s currency to plummet.

On Monday, Gordhan, who was finance minister from 2009 to 2014, reassured the country that the economy will be steadied.

“I represent the new scenario,” he said. The markets responded well to a familiar face, with the country’s currency, the rand, recovering to 15.26 to $1 Monday. Gordhan’s reinstatement was as a result “the importance of listening to the people,” South Africa’s President Jacob Zuma said.

The turmoil in Africa’s second largest economy, revealed political wrangling over a planned nuclear deal and questionable spending at the struggling national airline carrier.

Late last Wednesday, when Zuma fired finance minister Nhlanhla Nene after just 19 months in the position, the currency dropped to 15 rand to $1 dollar. The next day the rand slumped even further to 16 rand to $1.

South Africa’s economy was already troubled. Just a week before, ratings agency Fitch downgraded the country to BBB-. Standard & Poor’s maintained South Africa’s BBB- foreign currency credit rating, but revised the outlook to negative. The country had narrowly missed entering a recession with less than 1 percent growth, said Statistics South Africa.

“In the midst of these problems and uncertainty, the minister is fired and replaced by somebody who is not known by the markets, business or any other sector,” said Cas Coovadia, managing direction of the Banking Association of South Africa.

Zuma’s decision drew much criticism from opposition parties, the finance sector and citizens on social media.

Much speculation said that Zuma sacked Nene because of his reported refusal to approve the purchase of new Airbus jets in a controversial deal through a third party. This allegedly brought the anger of the airline’s chairwoman, Dudu Myeni, known as a close ally of Zuma.

“Rumors about a romance and a child are baseless and are designed to cast aspersions on the President,” Zuma’s office said in a statement dismissing a list of rumors.

There was also speculation that Nene was fired because he refused to approve a nuclear deal, which could see Russian companies building a string of power stations worth billions of dollars, South African media reported.

On Monday, BusinessDay newspaper reported that Cabinet approved a deal for the proposed nuclear power program on the day Nene was fired. The South African government has officially denied the reports.

One analyst says the uncertainty of the last days is a political plus for South Africa.

“An attempt was made to cross a line that hasn’t been made in 20 years, which was to make the national treasury a vehicle for the interests of particular politicians,” said Steven Friedman, director of the Centre for the Study of Democracy. “Nobody’s going to touch the treasury for a long time. A very clear line has been drawn.”

The days of economic turmoil may have passed for now, but infighting in the ruling party will likely continue until 2017, when a new party president is elected.

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