Before his December 9, 2015 removal from Treasury, Nhlanhla Nene oversaw the rand trading from R11 to just over R14 to $1. On December 4, Fitch Ratings downgraded South Africa’s long-term foreign rating to BBB- from BBB and its local currency issuer default rating to BBB from BBB+.
On the same day, Standard and Poor’s revised its South Africa rating from stable to negative. Moody’s Investor Services affirmed South Africa Baa2 government issuer rating, changing the rating outlook from stable to negative.
The agencies dovish ratings broadly indicated labour strikes, political instability due to parliament theatrics and #FeesMustFall movement, the lowered GDP growth prospects, persistent electricity shortages and weak business confidence as confluence.
As #FeesMustFall marched to Union Buildings, Luthuli House and parliament, then minister of finance Nhlanhla Nene delivered a conservative, nonprogressive medium-term budget.
Amid unrest, he chose not to allocate extra funding to higher education, dismissively stating in parliament “we have been reminded this past week of the challenges of financing the expansion of further education and university opportunities. It needs to be said that disruption of learning is not constructive. But Minister Nzimande has rightly indicated the need to strengthen student financing further and to find solutions where current arrangements are inadequate.”
Nene insisted to Zuma that there was no money for fees, stating that Zuma’s promise to finance the 2016 fee escalation would not be accommodated in the 2016 budget. Nzimande also failed to get more funding from Nene.
This prompted Zuma to instruct Treasury to redo the entire budget, a task Nene protested. Upon his removal, departments redrew their plans in December for new minister Pravin Gordhan to consider with Zuma to include fees concession.
DA leader Mmusi Maimane bizarrely shouted disruptively at Zuma in parliament “the rand had been stable prior to Nene’s removal”, causing Speaker Mbete to eject him from the House. A week before his removal, Nene did what I saw as another likely act of potential conflict with Zuma.
Cheered by the financial sector and the rich, mainly white South Africans keen to move money abroad since 1994, Nene softened key exchange controls leading to weakening of the rand above R14 due to cash outflows by citizens with dual passports or immigrating.
He allowed the R1 million single discretionary allowance (SDA) and R10 million foreign investment allowance per calendar year without having to return to South Africa. Previously, expatriate South Africans could not access R1 million SDA.
Nene also allowed the use of home-issued credit and debit cards abroad with single discretionary limit of R1 million. Offshore allowance rose from R4 million to R10 million. The immigration allowance is now up to R20 million and corporates can take a billion rands offshore, leading to overwhelming exit permits being issues and renewed pressure on the rand.
Nene became a sensation. This period is regarded as the single largest period of millionaires emigrating. This decision has so far been inflationary and induced huge cash outflows.