JOHANNESBURG, Dec 11:  South Africa's rand slumped to record lows for a second day on Friday as the country's economic prospects darkened over President Jacob Zuma's firing of the respected finance minister.
The rand breached 16 to the US dollar for the first time, government bond yields rose and bank stocks dived further in reaction to Nhlanhla Nene being dismissed late Wednesday.
Nene was replaced by David van Rooyen, a little-known figure from the ruling African National Congress (ANC) party, in a move greeted with dismay by many investors and financial analysts.
But late Friday Zuma explained the shock ouster for the first time. He said Nene had been nominated as South Africa's candidate to head the African Regional Centre of the newly formed BRICS bank.
"We are fully backing his candidature, knowing full well that he will excel and make the nation proud in his next assignment," said a statement.
Zuma said Nene's departure "does not signal a change in the government's fiscal stance."
"Government will not abandon the fiscal path that we have chosen in the last few years. Maintaining a prudent fiscal position remains one of government's top priorities," it said. But economists were not so convinced.
"Nene was not prepared to be used as Mr Zuma's own petty cashbox," Ian Cruickshanks, chief economist with the South African Institute of Race Relations, told AFP.
"Foreigners are getting assets out. There are lots of uncertainty, the only solution to protect the exchange rate of the rand is an intervention by the Reserve Bank (raising interest rates)," he said.
South Africa, the continent's second largest economy, is struggling with unemployment stubbornly high at over 25 per cent, low growth and the threat of a credit rating downgrade to "junk" status.
The rand has lost about 30 per cent of its value against the dollar this year -- falling 8.0 per cent alone since Nene was removed.
His fate and the market reaction unleashed a bout of deep pessimism in South Africa over ANC rule which has dominated politics since Nelson Mandela won the first post-apartheid elections in 1994.
Van Rooyen is seen as likely to back huge outlays on a nuclear station building programme and the troubled state airline as well as public spending ahead of local elections next year.    ?AFP