As the South African President Jacob Zuma ousted Pravin Gordhan and other top ministers, inviting economic uncertainties for the country, rand slumped four per cent against the US dollar.
According to a report in CNN Money on Friday, investors were already fretting about Africa’s second biggest economy after Zuma ordered now former finance minister Gordhan to cancel a series of meetings in London on Monday and return home. The rand has slumped about eight per cent this week.
The is believed to severely affect the economy of South Africa and could lead to the country’s credit rating being downgraded.
“If investors lose faith and trust in our economy, all citizens — not just big business — pay the price for this, in the form of higher inflation, decreased buying power as well as decimated savings, pensions and investments,” the CEO Initiative was quoted as saying.
The CEO Initiative’s members include the heads of Investec, Standard Bank, Telkom and top mining companies.
“Investec shares, listed in London, fell nearly nine per cent. Another big financial firm, Old Mutual, saw its shares fall six per cent,” the report noted.
The dismissal of finance minister and other cabinet ministers is expected to cause chaos in the country.
“This would be the worst outcome for markets over both the short and medium term. It’s also likely to worsen tensions within the governing party, the African National Congress (ANC),” John Ashbourne, Africa economist at Capital Economics said.
Gordhan first served as finance minister between 2009 and 2014. Zuma appointed him for the same portfolio after sacking two other finance ministers within a month.
It was the period of turmoil that hammered South Africa’s markets and currency, but Gordhan helped stabilise the situation.
“Gordhan and Zuma clashed over issues such as the management of state-owned enterprises and the need for a big new economic plan,” the report said.