South Africa and Three Finance Ministers in Five Days

SOUTH AFRICA - In Brief 16 Dec 2015 by Iraj Abedian

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The past week will be remembered in the annals of South Africa's history for the most bizarre, and idiotic, presidential governance decisions in modern times. President Zuma sacked his respected and experienced Finance Minister, Nhlanhla Nene, replaced him with an unknown political entity, David van Rooyen, who was sworn in on Friday and moved aside on Monday-only to be replaced by Pravin Gordhan who had acted as the finance minister in Zuma's first administration from 2009 to 2014. Gordhan had proved to be too independent and broadly speaking a principled finance minister during his term of office. Many of Zuma's political and business allies disliked Gordhan's clean and principled approach to fiscal governance, and had thus pushed him aside in the cabinet to deal with the complexities of South Africa's local government problems. During the past weekend, President Zuma had to learn two quick and very expensive lessons in political economy. He witnessed how effectively and quickly the markets deal with stupid governance decisions. Following his Thursday evening announcement to remove Minister Nene, the forex markets hammered the rand, the bond markets reacted swiftly, and the domestic business groupings came out guns blazing. His reckless decision wiped off billions off the local stocks and set in motion a train of actions that in time will cost South Africa a massive loss of credibility both in brand and economic opportunities. By his own admission, and by the ANC's acknowledgement, he and the ANC did not expect such huge market reaction! The second lesson was as painful. The ANC heavy weights had to prevail over the president to sack the new minister, van Rooyen, and...