The rand continued its free fall against major currencies on Friday morning as the nation awoke to the news that Finance Minister Pravin Gordhan had been axed and replaced by former home affairs minister Malusi Gigaba as part of a major Cabinet reshuffle announced at midnight by President Jacob Zuma.
In a fall reminiscent of that witnessed in the wake of Nenegate in December 2015‚ when Zuma replaced then finance minister Nhlanhla Nene with the relatively unknown Des van Rooyen‚ the rand plummeted overnight‚ losing almost 3% against the dollar‚ pound and euro in opening trade.
The local currency reached intraday worst levels of R13.6282 to the dollar‚ R14.5501 against the euro and R17.0017 against the pound before managing to claw back some of the losses.
At 8.16am‚ the rand was at R13.4656 to the dollar from an overnight close of R13.2644. It was at R14.3850 against the euro from R14.1566 previously and at R16.7961 against the pound from R16.5395.
The euro was at $1.0682 from $1.0673.
Nomura emerging markets analyst Peter Attard Montalto said the market would struggle to digest the appointment of Gigaba‚ who had been effective at home affairs‚ but was “clearly being put in a role to do a particular job by Zuma and viewed as loyal to Zuma“.
“The market has been far too complacent that Zuma cannot remove Gordhan but he has now gone and done it and yet the market is still hanging onto the hope of a credible candidate‚ which has not come‚ with a complete clear-out at National Treasury.
“This is a full whack Zuma-led reshuffle which will lead to multiple imminent downgrades where Zuma is confident he has the upper hand over weak internal ANC opposition‚” Attard Montalto said.
The Banking Association of SA said the vacuum of leadership caused by the Cabinet reshuffle and appointment of a new finance minister and deputy minister‚ and the removal of additional Cabinet ministers was of “extreme concern” for the whole of SA.
“The actions of the president have put our country into turmoil‚ at a time the country is trying to come together to address the problems we face. We have no choice but to say this reshuffle is not in the best interests of the country. We are also left with little choice but to question the motives behind this action.
“The specific change in both finance minister and deputy finance minister creates a dire loss of institutional knowledge and raises legitimate and alarming concerns regarding issues of fiscal discipline‚ protection of institutions and indeed the scope state capture‚” the association said in a statement.