Jacob Zuma, South Africa’s president, has reappointed Pravin Gordhan as finance minister in the wake of a huge backlash following his decision to appoint a little known parliamentarian to the post.
The appointment represents a dramatic twist in several days of extraordinary political manoeuvres in Africa’s most industrialised economy which has raised severe concerns about the financial management of South Africa.
Mr Zuma triggered a storm of market turmoil when he shocked investors by replacing Nhlanhla Nene with Douglas Van Rooyen, a little known parliamentarian with no previous experience in national government, on Wednesday.
The decision rattled investors and sparked a wave of anger among South Africans who questioned the motives behind the move, while further damaging the image of Mr Zuma’s scandal-prone presidency.
Mr Nene, who had earned respect among domestic and international investors, had only been in the job for about 18 months after replacing Mr Gordhan following last year’s election in May.
The rand plunged by about 9.5 per cent in the two days after the announcement of Mr Nene’s dismissal, while the yield on South Africa’s benchmark 2026 bond has jumped from 8.75 per cent to 10.38 per cent since Wednesday.
Many South Africans, including those within Mr Zuma’s ruling African National Congress, were aghast at the decision to remove Mr Nene amid concerns that the Treasury, which has been one of the nation’s most highly regarded institutions, was falling victim to political meddling.
Mr Zuma’s dramatic about-turn in reappointing Mr Gordhan, who replaced Trevor Manuel as finance minister in 2009, is a reflection of the pressure his office came under.
“As a democratic government, we emphasise the importance of listening to the people and to respond to their views,” the president’s office said in a statement.
The statement said that Mr Van Rooyen had been moved to the post of minister of co-operative governance and traditional affairs.
The saga is a severe embarrassment for South Africa, which is one of the world’s most traded and liquid emerging markets, and will add to concerns about the quality of leadership, and exacerbate policy uncertainty.
South Africa’s economy is expected to struggle to grow much beyond 1 per cent this year and next, while any potential US interest rate rise is likely to put more pressure on the weak rand. This comes during a period when liquidity in South Africa’s markets is at its tightest and a single trade can have an impact on the currency.
Days before Mr Nene’s dismissal, Fitch downgraded South Africa’s credit rating to triple B minus, while Standard & Poor’s cut its outlook from stable to negative, heightening the risk that the country could be downgraded to junk status for the first time since 2000.