Nhlanhla Nene

Nhlanhla Nene Finance Minister – File Photo

Analysts say if Finance Minister Nhlanhla Nene resigns, rand could plummet below R15/$

Looks like Finance Minister Nhlanhla Nene is on his way out. Unfortunately, the rand is set to take a big knock as a result.

Nhlanhla Nene

Nhlanhla Nene Finance Minister – File Photo

Finance Minister Nhlanhla Nene has reportedly asked President Cyril Ramaphosa to relieve him of his duties due to his involvement in state capture.

Nene dropped bombshells last week when he appeared before the Commission of Inquiry Into State Capture. In contradiction to previous statements made, the embattled Finance Minister revealed that he had met with the infamous Gupta family at least six times between 2010 and 2015.

Finance Minister Nhlanhla Nene asks to be fired

While Nene testified to defending the South African economy against complete financial collapse by refusing to sign the controversial nuclear deal, which was spearheaded by former president Jacob Zuma, his admittance to dubious meetings involving the Guptas has resulted in a public outcry.

According to Nene, he was fired because he stood in the way of Zuma and the nuclear deal. For his defiance, Nene was removed from his ministerial position in 2015 and briefly replaced by Des van Rooyen. Nene has since offered a public apology to the people of South Africa, saying:

“I was wrong for meeting the Guptas at their residence, and not at my office or at least in a public place. As soon as I became aware of the controversy swirling around the family’s dealings, I should have called a meeting along with the Treasury.

I am human too, and I make mistakes. It’s reasonable for the public to expect [politicians] to own up fully and timeously to the mistakes, they make when carrying out public duties. I therefore failed to live up to those ideals. I deeply regret these lapses and beg your forgiveness.”

The African National Congress (ANC) is apparently already looking for a new Finance Minister to replace Nene, who is expected to be relinquished of his duties this week. And while most politicians agree that Nene should be held to account, his dismissal has the propensity to bring about serious instability within the already uneasy political climate.

Uncertainty regarding Nene’s replacement

According to economic analysts, who spoke to Fin24, this instability will impact negatively on the currency, which has managed to painfully claw back some ground following serious losses last month.

Musa Makoni, a trading specialist at GT247, maintains that the government is in a catch-22 situation. Ramaphosa is being urged, from all sides, to act against Nene – yet, his swift removal will undoubtedly rock the rand. Furthermore, the question mark hanging over Nene’s successor has the propensity to breed further uneasiness. Makoni said:

“If he [Nene] resigns, it will bring the question of who can fill his shoes.”

Wichard Cilliers of TreasuryONE also stressed the importance of stabilising the financial and political climate as a means to hopefully drag the country out of its economic recession. Cilliers said:

“We need stability in order to sort out the ailing fiscus.”

The rand is set to take a knock

Even more worrying, is that the nation’s mini-budget is set to be delivered on October 24. With Nene’s resignation almost imminent, issues surrounding the upcoming budget address, which is, at this point in time, of the utmost importance, are set complicate money matters.

While the rand hovers uncomfortably around R14.80 to the dollar, analysts believe Nene’s resignation, and the instability arising from his hurried replacement could plunge the rand back below the R15 mark.