S. Africa Banks, Rand Pare Falls After Manuel Quits

By Vernon Wessels and Janice Kew

Sept. 23 (Bloomberg) -- South Africa's rand, bonds and stocks pared losses after Finance Minister Trevor Manuel unexpectedly quit along with nine other Cabinet ministers following President Thabo Mbeki's ouster by the ruling African National Congress.

``This is not great news for foreign investor sentiment, this wasn't expected,'' said Ferdi Heyneke, a trader at Afrifocus Securities Ltd. in Johannesburg. ``The finance minister did a great job and was highly respected. The banks are taking the hit after this. The market is going to be very volatile.''

Standard Bank Group Ltd., Africa's biggest lender, fell as much as 9 percent, its biggest decline in a decade, and was trading 2.7 percent down as of 3:10 p.m. in Johannesburg. FirstRand Ltd., the second largest South African bank, fell 3.1 percent. The rand had its worst fall in a month before paring losses as government bonds slumped.

Manuel, 52, had been finance minister since 1996, overseeing the economy's longest expansion on record and the first budget surplus. Three deputy ministers have also submitted their resignations, the presidency said in an e-mailed statement today. South African Deputy President Phumzile Mlambo-Ngcuka also quit.

Manuel was ``duty bound'' to resign because he was appointed by Mbeki and would be willing to serve the new government ``in whatever capacity,'' National Treasury spokeswoman Thoraya Pandy said in a telephone interview.

`Continuity'

``If the ANC is serious about continuity it's important Manuel serves out his term and then sits in to advise for another year or two after that,'' said Graeme Korner, a fund manager at Nedbank Ltd.'s BoE Private Clients, which oversees more than $10 billion. ``This just adds to existing uncertainty in international markets.''

The currency of Africa's largest economy last traded at 8.1510 per dollar from 7.9875 yesterday, after sliding as low as 8.2176. The yield on South Africa's benchmark 13.5 percent security due September 2015 climbed to 9.02 percent from 8.93 percent yesterday.

The FTSE/JSE Africa All Share Index fell 2 percent to 25,381.23, after earlier falling as much as 4.4 percent, as five stocks fell for every one that gained. Old Mutual Plc, the continent's biggest insurer, fell 3 percent to 12.61 rand.

Investor Concerns

``It's like the carpet has been pulled out from under our feet as Mbeki heads out the door,'' Rudi van der Merwe, a fund manager at Standard Bank's private client unit in Johannesburg, said. `` It's going to be tough until we have proper certainty.''

Manuel's exit adds to investor concerns about the future of economic policy in the country as ANC leader Jacob Zuma and his allies strengthen their influence in the party. The leadership of the ANC ordered Mbeki to quit eight days after a High Court judge suggested he pressured prosecutors to pursue corruption charges against Zuma, whom Mbeki fired in 2005.

``Manuel's resignation is the first sign that South Africa's sound economic policies may change and that is a big worry to international investors,'' said Shahin Vallee, an emerging-market currency strategist in London at BNP Paribas SA, France's largest bank. ``It no longer looks like South Africa will have a seamless political transition.''

To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.netJanice Kew in Johannesburg at jkew1@bloomberg.net