The rand weakened to nearly R15 against the dollar, its weakest level in a month after reports emerged that Nene had asked President Cyril Ramaphosa to allow him to throw in the towel, following his admission that he made undisclosed visits to the controversial Gupta family.
By 5pm, the rand was bid at R14.8692 against the greenback while the government bonds also climbed to above 9 percent to reach its highest level since December. Nene’s future is now in Ramaphosa’s hands
Bianca Botes, a corporate treasury manager at Peregrine Treasury Solutions, said global markets were not likely to view Nene’s exit in a good light as it could threaten the stability of the National Treasury once again. “With the Moody’s credit ratings announcement and the MTBPS looming, there couldn’t be a worse time for the exit of the Finance Minister, especially given that we need to demonstrate stability,” Botes said.
Speculation over Nene’s future has also escalated to questions about who would deliver the country’s crucial Medium Term Budget Policy Statement (MTBPS) this month.
The MTBPS is expected to, among others, give further detail to Ramaphosa’s stimulus package announced last month and his ambitious plan to rescue the country’s ailing economy.
Nene’s fate has also been complicated by claims that his son may have benefited unduly from the Public Investment Corporation (PIC) at the time when he was the corporation’s chairperson. The PIC has defended the deal, saying it was done on the basis of satisfactory due diligence.
Institute of Race Relations chief economist Ian Cruickshanks said the president should make a decision on Nene soon.
“The fact that a minister of finance could lie to the nation about his relationship with the Gupta family is unacceptable. His lack of honesty has hurt government bond yields, the rand and financial markets,” Cruickshanks said.
Speculation is already rife that Nene’s deputy Mondli Gungubele will be elevated to the head of national treasury, while Gauteng’s head of treasury Barbara Creecy name has also been mooted.
George Herman, chief investment officer at Citadel, said there were many worthy candidates to fill Nene’s shoes, should he be shown the door.
”Should he wish to appoint a new one, there is a great opportunity for President Ramaphosa to further increase his vision and create policy impact on the levers of power, by appointing a solid and respected Minister of Finance,” Herman said.
The national treasury is facing a mammoth task to stave off further credit downgrades and deliver a sound MTPBS at a time the economy is in its first recession since 2012 and under-collection by the tax man. Nene only took over the helm at the National Treasury in February, following Jacob Zuma’s ouster.
“If it is the case that Nene is replaced, the impacts and implications are likely to be on intangible elements, especially investor confidence. This, however, is speculative at best and it can only be assessed once there is certainty about Minister Nene’s position,” said Dr Adrian Saville, chief executive of Cannon Asset Managers.