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Finance Minister’s fall could be disastrous for business

Nhlanhla Nene. Nhlanhla Nene. [Image: www.dailymaverick.co.za]

President Jacob Zuma has announced that Nhlanhla Nene has been removed as Minister of Finance ahead of what he calls another strategic redeployment.

“I have decided to remove Nhlanhla Nene as Minister of Finance ahead of his deployment to another strategic position. Nene has done well since his appointment as Minister of Finance during a difficult economic climate,” said Zuma.

Nene is being replaced by David van Rooyen, a former Merafong Municipality mayor and current Member of Parliament where he serves as Whip of the Standing Committee on Finance and as Whip of the Economic Transformation Cluster.

Zuma’s surprise decision is expected to intensify the country’s economic woes and sent the rand plummeting as much as 5.7% against the dollar, hitting a new record low.

Janine Myburgh, president of the Cape Chamber of Commerce, said the only good thing that would come from the tumbling rand was a good tourist season, but that we may be looking at a short-term gain.

“The firing of Nene already has had a negative effect of the rand, which disastrously effects business. Government is meant to create an enabling environment for business to thrive in. Actions such as these have the complete opposite effect.”

Myburgh said the main reason for the shocking fall of the rand is not the commodity crisis, but plain bad management of the country as seen in Eskom, SAA, PRASA, the collapse of the Post Office and the inability to control the rising public expenditure.”

"Any outsider looking at these events in South Africa will have great difficulty in finding reason to invest in the country or even to retain existing investments.”

"We know that Nene was greatly concerned about all these areas, but he has run into fierce resistance from colleagues with a more limited knowledge of financial management. Recent decision on SAA prove the point.”

Myburgh said the big fear now was that Nene had been removed because he threated to block the new R4bn personal jet for Zuma and the nuclear deal with Russia.

"Nuclear was rejected at this stage by the National Planning Commission because it was too expensive and it made more sense to invest in smaller gas and renewable power projects as they would be easy to finance, would come online very much sooner than any nuclear power stations and ensure maximum flexibility so that we could take advantage of new technology becoming available."

She pointed out that no commercial bank in the world would lend money for new coal or nuclear power stations unless there were watertight government guarantees, "but the commercial banks are lining up to invest in renewable energy as we saw in our three recent rounds of renewable energy bidding. What does this tell us? It tells us that thermal power stations have become bad investments and should be avoided.”

"The fact is that PV solar is becoming cheaper and more efficient each year while coal and nuclear power can only get more expensive. Solar is already cheaper than the retail price of electricity (municipal tariffs) and the new solar farms will sell us electricity cheaper than any of Eskom's new power plants."

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