South Africa Rand Slumps: Following the overhauling of President Jacob Zuma’s cabinet, the value of the rand plunged more than 5% overnight.
The nose-diving of the rand was particularly traced to the replacement of Finance Minister Pravin Gordhan with Malusi Gigaba.
In response to the development, domestic and international investors expressed concerns on Friday over Zuma’s growing control over the country’s purse strings.
Weighing in, the chief Africa economist at the Standard Chartered Plc told reporters that the reshuffle will surely stir up negative reactions at the market.
“Market reaction to the cabinet reshuffle and what looks to have been a clean sweep of the Treasury top team is going to be a significant negative,” Razia Khan explained.
Gordhan, who many see as a parapet against corruption and scandals that plague the Zuma-led administration was reportedly the chief target of the reshuffle.
Prior to his dismissal, Gordhan was widely recognized as a respected finance minister who stood up against the president’s plans for looser fiscal policy and radical redistribution of wealth.
He is regarded as a guarantor of a stability-oriented policy aimed at rebalancing the country’s public finances, which have spiraled out of control.
This played out during the funeral of ANC struggle icon Ahmed Kathrada, where he received a standing ovation for being an embodiment of Kathrada’s values and leading a campaign aimed at boosting South Africa’s weak economy through [foreign] investment.
Last night, Zuma ruffled a lot of feathers, announcing a major cabinet reshuffle with 20 new appointments, a move considered as an effort to gain more power over his government and control the choice of his successor.
In a statement issued by President Jacob Zuma, he described his midnight cabinet reshuffle as a “radical socio-economic transformation”.
He also detailed in the statement that new appointees must ensure that the “promise of a better life for the poor and the working class” becomes a reality.
“I have directed the new ministers and deputy ministers to work tirelessly with their colleagues… to ensure that the promise of a better life for the poor and the working class becomes a reality,” he said.
On Monday, the rand reversed gains of as much as 1 percent and traded 2.5 percent lower against the dollar after Gordhan and his deputy, Mcebisi Jonas, were instructed to pull out of meetings in London and the USA with investors and ratings companies.
Zuma replaced Gordhan with Former Home Affairs Minister Malusi Gigaba while Sfiso Buthelezi replaced Gordhan’s deputy Mcebisi Jonas.
In December 2015, he bowed to pressure from within the ANC and appointed Gordhan as finance minister after markets tumbled when he replaced respected economist Nhlanhla Nene with little-known lawmaker David van Rooyen.