South Africa’s capital markets bled billions of rands in the two days following President Jacob Zuma’s late Wednesday night firing of Finance Minister Nhlanhla Nene.
Apart from the rand falling to its lowest level against the US dollar in history, there was a bloodbath on the JSE as investors pulled out and drove the JSE’s total market capitalisation down by almost R170-billion.
JSE CEO Nicky Newton-King warned in a statement yesterday that Zuma’s abrupt replacement of Nene with a relatively unknown member of parliament, would have a longer term effect on the stability of the economy.
She said individuals and corporates should be aware of the seriousness of the moment‚ “and take accountability for how we respond”.
Newton-King’s statement coincided with Sunday newspaper advertisements by Business Leadership SA (BLSA)‚ which represents 78 of SA’s biggest companies and multinationals‚ in which it said SA could ill-afford to score “own goals” while tackling problems like high unemployment‚ below-target economic growth and the increasing cost of servicing national debt.
“In this context the replacement of an effective and trusted finance minister just 18-months into his term of office has raised doubts about our ability to maintain prudent macro-economic policies‚” BLSA said.
The JSE handled unprecedented volumes on Thursday and Friday.
Average daily value traded in equities was R47.8-billion‚ more than double the average of R19.9-billion a day in the year-to-date.
The FTSE/JSE financial 15 index fell 13.36%‚ the FTSE/JSE banks index dropped 18.54% and the FTSE/JSE all-share index shed 2.94%.
The market capitalisation of the whole JSE went down by 1.49% to R11.18 trillion‚ a loss of R169.6-billion.
The benchmark government bond‚ the R186‚ which was trading on a yield of 8.66% at the beginning of the week‚ ended the week at 10.40%.
“Market losses put strain on credit extension and interest rates‚ and raise borrowing costs for companies and individuals‚” Newton-King said.
“As cost of capital becomes more expensive‚ this in turn constrains the growth stimulus which we desperately need.
“The outlook for much-needed job creation opportunities diminishes. “And higher lending rates make everyday life more expensive for ordinary South Africans.
“Continued currency depreciation will have a profound impact on fuel prices and on inflation overall‚ which will hurt companies‚ small businesses‚ and individuals,” she added.
As the financial fallout continued to shake the country, Zuma came out in defence of South African Airways board chairperson, Dudu Myeni.
In a statement released on Saturday, Zuma broke his silence on claims that he and Myeni were in a romantic relationship and Nene’s axing was as a result of his refusal to approve a change in SAA’s leasing arrangements with Airbus.
“Rumours about a romance and a child are baseless and are designed to cast aspersions on the president‚” the statement said.
It said claims that SAA was transferred to the National Treasury because Myeni demanded that it be so were “grossly untrue”.
“SAA was moved to the National Treasury so that it can be intensively supported to get out of difficulties by the National Treasury. That was the sole motivation. The president and government will be guided by the National Treasury on the response to the SAA challenges,” it added.
On rumours that Nene was axed because of Myeni’s Airbus swop deal‚ the statement said the rumours were “malicious and fabricated”.
“Mr Nene‚ as has been explained‚ is South Africa’s candidate to head up the African Regional Centre of the New Development Bank‚ Brics Bank.”
— With additional reporting by Amanda Khoza
JSE bleeds billions after Nene axing
Apart from the rand falling to its lowest level against the US dollar in history, there was a bloodbath on the JSE as investors pulled out and drove the JSE’s total market capitalisation down by almost R170-billion.
JSE CEO Nicky Newton-King warned in a statement yesterday that Zuma’s abrupt replacement of Nene with a relatively unknown member of parliament, would have a longer term effect on the stability of the economy.
She said individuals and corporates should be aware of the seriousness of the moment‚ “and take accountability for how we respond”.
Newton-King’s statement coincided with Sunday newspaper advertisements by Business Leadership SA (BLSA)‚ which represents 78 of SA’s biggest companies and multinationals‚ in which it said SA could ill-afford to score “own goals” while tackling problems like high unemployment‚ below-target economic growth and the increasing cost of servicing national debt.
“In this context the replacement of an effective and trusted finance minister just 18-months into his term of office has raised doubts about our ability to maintain prudent macro-economic policies‚” BLSA said.
The JSE handled unprecedented volumes on Thursday and Friday.
Average daily value traded in equities was R47.8-billion‚ more than double the average of R19.9-billion a day in the year-to-date.
The FTSE/JSE financial 15 index fell 13.36%‚ the FTSE/JSE banks index dropped 18.54% and the FTSE/JSE all-share index shed 2.94%.
The market capitalisation of the whole JSE went down by 1.49% to R11.18 trillion‚ a loss of R169.6-billion.
The benchmark government bond‚ the R186‚ which was trading on a yield of 8.66% at the beginning of the week‚ ended the week at 10.40%.
“Market losses put strain on credit extension and interest rates‚ and raise borrowing costs for companies and individuals‚” Newton-King said.
“As cost of capital becomes more expensive‚ this in turn constrains the growth stimulus which we desperately need.
“The outlook for much-needed job creation opportunities diminishes. “And higher lending rates make everyday life more expensive for ordinary South Africans.
“Continued currency depreciation will have a profound impact on fuel prices and on inflation overall‚ which will hurt companies‚ small businesses‚ and individuals,” she added.
As the financial fallout continued to shake the country, Zuma came out in defence of South African Airways board chairperson, Dudu Myeni.
In a statement released on Saturday, Zuma broke his silence on claims that he and Myeni were in a romantic relationship and Nene’s axing was as a result of his refusal to approve a change in SAA’s leasing arrangements with Airbus.
“Rumours about a romance and a child are baseless and are designed to cast aspersions on the president‚” the statement said.
It said claims that SAA was transferred to the National Treasury because Myeni demanded that it be so were “grossly untrue”.
“SAA was moved to the National Treasury so that it can be intensively supported to get out of difficulties by the National Treasury. That was the sole motivation. The president and government will be guided by the National Treasury on the response to the SAA challenges,” it added.
On rumours that Nene was axed because of Myeni’s Airbus swop deal‚ the statement said the rumours were “malicious and fabricated”.
“Mr Nene‚ as has been explained‚ is South Africa’s candidate to head up the African Regional Centre of the New Development Bank‚ Brics Bank.”
— With additional reporting by Amanda Khoza
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