South Africa gets its third finance minister in four days. Nobody seems to find it funny
Nhlanhla Nene may have started his public life by falling from a chair during a television interview. But when South Africa’s respected finance chief was sacked for no apparent reason last Wednesday, people wanted someone else to come down with him. Gathered under the #ZumaMustFall banner, thousands of protesters decided they'd had enough of their president’s disdain and incompetence.
They were not alone. The markets also expressed surprise and disappointment at Nene's removal, lifting South Africa’s borrowing costs to 10.38 percent last Friday – the highest level since the Financial Crisis – and pushing its currency to record lows. About R169 billion ($11 billion) were wiped off equities listed on the Johannesburg Stock Exchange in two days.
So Sunday evening Jacob Zuma made a complete U-Turn. “As a democratic government, we emphasise the importance of listening to the people and to respond to their views,” his office said in a statement. His administration duly dismissed Douglas Van Rooyen, the new finance minister, and replaced him with a new new one. Not so new in fact: Pravin Gordhan previously held the role between 2009 and 2014.
That will work to his advantage. What perplexed observers almost as much as Nene’s abrupt dismissal was the choice of an obscure parliament with no government experience as his replacement. The government itself didn’t seem very well informed on the issue: the office of the presidency called the new man as David while the Treasury introduced him as Douglas.
Markets welcomed the end of David Douglas's ephemeral tenure. On a day where sliding oil prices brought emerging market stocks to a six-year low – as measured by the MSCI Emerging Market index – South African equities jumped 2.2 percent. But the rally didn’t last long: the benchmark ended up settling unchanged. Meanwhile 10-year borrowing costs eased a little, but at 9.92 percent they remain higher than they’ve been for years.
That reflects persisting doubts about what ultimately drives Jacob Zuma’s choices for the nation he rules: does he have a plan for fixing his country’s economy or is he merely interested in political expediency? Circumstances around Nene’s dismissal leave room for doubt. The word on the street says Jacob Zuma and Dudu Myeni, chairwoman of state-owned South African Airways, have more than a professional relationship. Some suspect Nene was removed because he resisted SSA’s plans to rearrange a leasing deal with Airbus.
Whether Zuma cares about his country matters a great deal. South Africa’s economy is struggling: growth is not expected to go much beyond 1 percent this year and inflation, at nearly 5 percent, is far above target. Industry continues to be crippled by chronic power shortages, the mining sector is broke and the country remains one of the most unequal in the world.
How much damage Zuma has done to his nation’s credibility will soon become evident: the government plans to raise R2350 million ($147 million) via long-dated bonds on Tuesday. A failure to do so would look terrible for South Africa, the continent’s most liquid market. Rating agencies probably aren't holding their breath: Fitch downgraded the country to one notch above junk last week – before the Nene fiasco.