What's going on?

Turbulent times in South Africa! The country has its 3rd finance minister in a week after a chaotic u-turn by its President. Its currency recovered somewhat on Monday after a brutal end to last week when it fell 10% versus the US dollar (the worst weekly move in 4 years).

What does this mean?

Last week, South Africa�s controversial President, Jacob Zuma, fired the country�s finance minister and replaced him with an inexperienced politician. It smelled like he was putting in his own puppet. Financial markets hated it and South African stocks and bonds, along with its currency, fell precipitously. Over the weekend, Zuma relented to the pressure and replaced the new appointee with a respected former finance minister. South African markets, including the currency, rallied on Monday following the news, although the instability caused by the whole situation has shaken investor confidence going forward.

Why should I care?

The bigger picture: South Africa�s economic situation is worrying. Credit rating agencies recently said South Africa�s government bonds are riskier than they used to be - and that things will probably get worse. Unemployment is high (around 25%) and economic growth is low (around 1%). The risks for South Africa seem only to be rising - and political missteps do not help. For the markets: Emerging markets (EM) are struggling. Many EM countries rely on exporting commodities and so they have been hit hard by the sell-off in the prices of things like oil and copper. Political instability, like in South Africa and Brazil, is harming the potential for recovery. EM stocks are down almost 30% since their April peak (in US dollar terms). It�s a perfect storm that is proving enduring.