The South African Rand erased its advance to become the worst performer in emerging markets after we detailed earlier that President Jacob Zuma ordered an international investor roadshow aborted – serving as a wake-up call to the country’s political risks.
Finance Minister Pravin Gordhan and his deputy, Mcebisi Jonas, were instructed to pull out of meetings in London and the U.S. with investors and ratings companies, the presidency said in a statement Monday, without giving a reason.
“There are some conclusions now being drawn that there’s possibly an imminent cabinet reshuffle,” said Manisha Morar, an analyst at ETM Analytics in Johannesburg.
“It puts into question our credit rating and the possibility of a downgrade coming sooner than later.”
Speculation that Gordhan is on the verge of being fired has swirled for months, as he clashed with Zuma over the management of state companies and the national tax agency. But those concerns were overshadowed by an emerging-market rally this year spurred by a decline in the U.S. dollar.
Today’s 3.2% plunge in the Rand is the biggest since the US election.
The government’s rand-denominated bonds due 2026 fell, driving the yield 33 basis points higher to 8.7 percent, the biggest jump since August, when Gordhan refused to report to a special police unit to be questioned about alleged irregularities at the national tax agency.