Zimpapers Logo

Cape Town — President Jacob Zuma on Wednesday announced the removal of Finance Minister Nhlanhla Nene from the Finance portfolio in Cabinet. “I’ve decided to remove Nhlanhla Nene as Minister of Finance, ahead of his deployment to another strategic position,” Zuma said in a statement. Zuma said that Nene had done well since his appointment as Minister of Finance during a difficult economic climate.

Zuma has appointed ANC member of parliament, David Van Rooyen, as the new Minister of Finance. Van Rooyen served as the Whip of the Standing Committee on Finance and as Whip of the Economic Transformation Cluster.

He was also a former executive mayor of Merafong Municipality and a former North West provincial chairperson of the South African Local Government Association. “The new deployment of Nene will be announced in due course,” Zuma said. Meanwhile, South Africa’s six-member banking index plummeted to levels not seen since the 2008 global financial crisis after Zuma fired Nene.

The industry benchmark fell as much as 8.2 percent and was 4.3 percent weaker as of 9.40AM in Johannesburg. FirstRand, Africa’s largest bank market value, tumbled as much as 10 percent, while Standard Bank, the biggest by assets, fell 9.1 percent. Barclays’ South African unit dropped 9.2 percent and Nedbank retreated 6.6 percent.

“All the banks are built on confidence – removing the finance minister isn’t good for the country’s confidence,” said Patrice Rassou, head of equities at Sanlam Investment Management in Cape Town, which oversees about $30 billion in assets. Zuma late on Wednesday removed Nene from his post after 19 months, without giving any reasons except to say that he would be moved to another key role.

The rand dropped as much as 5.4 percent against the dollar after Zuma’s announcement, the biggest decline since September 2011, hitting a record low of 15.3857.

The shock move came less than a week after credit rating companies pushed the nation closer to junk status, citing concerns over a sluggish economy and rising debt as inflation and interest rates climb. Mining and manufacturing are already under strain because of plunging metal prices and power constraints.

Investors may be concerned that the risk of increased impairments for bad debt is increasing, said David Shapiro, a director at Johannesburg-based money manager Sasfin Securities. “Are the banks lending to an economy that perhaps can’t handle it?” he said by phone. “You’d expect rising debt levels as inflation surges.”

The sell-off in banks could be a sign that some foreign investors are pulling funds out of the South African market, Shapiro said. “They are being used as punching bags,” he said. “The banks are the ones lending to the manufacturers and miners.”

Investec fell as much as 2.6 percent, while Capitec Bank, which provides unsecured loans, dropped as much as 7.3 percent. Rene van Wyk, the head of bank regulation in South Africa at the central bank, declined to speak about the plunge in the lenders’ stocks when called at his office. He referred questions to the central bank’s media department.

“Investors are now more worried about a downgrade to junk status,” Wayne McCurrie, who helps manage R170 billion at MMI Group, said by phone. “In South Africa, you just never know what’s coming. This increases uncertainty and the new finance minister is mostly unknown.

“The banks are the cheap part of the market,” he said. “It just shows that being cheap doesn’t help when sentiment turns.” – Bloomberg