South African President, Jacob Zuma, removed Finance Minister, Nhlanhla Nene, from his position on Wednesday, sending the country’s currency to a record low.
Nene’s dismissal followed the credit rating downgrade to just one notch above sub-investment grade by Fitch last Friday, Reuters reported.
South Africa’s economy is barely growing, squeezed by low commodity prices globally and the near certainty of an interest rate rise in the United States next week.
Since his appointment in mid-2014 Nene has emphasized the need to cap government spending, reign in bailouts to state-owned firms, and limit the size of wage increases to government employees.
Government spending on public sector wages and welfare, accounting for the largest slice of government expenditure, has long been seen as the ruling African National Congress’s chosen method to stay in power as it loses popular support.
The currency shed close to 5.0 percent to its lowest level ever, with analysts expecting it to fall even further as investors digest the news.
“The concern is the suddenness of the move. Why redeploy a finance minister that was well received and well respected by the investor community,” said head of research at Nedbank, Mohammed Nalla.
Zuma gave no details on why Nene, who has been serving as head of the treasury for just under two years, was dismissed.
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