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South Africa's President Jacob Zuma speaks during a Forum on China-Africa Cooperation in Sandton, Johannesburg, Dec. 4, 2015.

© Siphiwe Sibeko / Reuters

Four days of political chaos in South Africa, including the shocking dismissal of its finance minister and then the swift departure of his replacement, have severely damaged the financial stability of Africa's most industrialized country.

The turmoil has sent South Africa's currency plunging to record lows, destroyed much of the equity of its banks and other leading companies, pushed its credit rating close to "junk" status and inflicted a heavy blow on the credibility of its President, Jacob Zuma.

South Africa's currency, the rand, recovered some of its losses on Monday after an unprecedented flip-flop by Mr. Zuma as he desperately tried to limit the damage. In a terse announcement on Sunday night, he dumped the new finance minister after just four days in office and brought back a respected previous minister.

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South Africa's political and economic turbulence will have far-reaching spillover effects across Africa, since its companies are major investors in the continent. South Africa has also been a haven for refugees and immigrants from across Africa, its politicians have led the African Union and its economy has helped to drive the region's growth – but all of this is now in jeopardy as Mr. Zuma struggles to cope with the crisis.

Mr. Zuma sparked the financial mayhem last Wednesday when he stunned the nation with a dramatic late-night announcement in which he fired his finance minister, Nhlanhla Nene, a widely trusted and experienced technocrat who had held the job for barely 18 months.

At the time of his dismissal, Mr. Nene was reportedly fighting to rein in the government's extravagant spending plans for a nuclear energy project and a commercial aircraft deal. The Finance Ministry was always considered a prudent guardian of South Africa's Treasury and a source of reassurance to investors. But that reputation was placed at risk when Mr. Zuma dumped Mr. Nene and replaced him with a little-known backbencher, David van Rooyen, who had no experience in national government.

The rand immediately plummeted to record lows. A stock-market bloodbath soon followed, with companies losing billions of rand in value. There was a chorus of outrage from across the country, and even Mr. Zuma's ruling party was silent, unwilling to give its usual strong support.

Mr. Zuma gave no explanation for the sacking for two days, and then he implausibly claimed that Mr. Nene was fired because he was suddenly needed for a regional banking job.

The President issued a series of odd statements on Friday and Saturday, denying that he would make any further cabinet changes and even denying that he had a "romantic relationship" with the chairwoman of the state airline, South African Airways, whose relentless campaign for a costly airplane leasing deal had sparked the conflict with Mr. Nene. He acknowledged his connections to the SAA chairwoman, Dudu Myeni, who also heads Mr. Zuma's private charity foundation, but said it was "purely professional."

But the pressure continued over the weekend, with Mr. Zuma receiving visits from his political allies and the business community. And then on Sunday night, around 9:30, Mr. Zuma issued another terse statement, saying Mr. van Rooyen would be shuffled to a lesser portfolio and replaced by a respected elder, Pravin Gordhan, who had been the finance minister from 2009 to 2014. The country reeled in disbelief at this game of "musical chairs" in the cabinet, and Mr. Zuma was mocked savagely on social media, but the rand rebounded as investors breathed a sigh of relief.

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One opposition party, the Democratic Alliance, denounced Mr. Zuma for "playing Russian roulette" with the economy. Another opposition party, the Economic Freedom Fighters, said he was turning the country into a "banana republic."

On Monday, at his first press conference, Mr. Gordhan admitted that the appointment of Mr. van Rooyen was a "miscalculation." But he hastened to reassure the country that the Treasury was back in stable hands. He pledged that the government would operate in a "fiscally responsible manner." And he noted that the rand had already recovered about half of its lost value, while the stock market had regained 75 per cent of its losses.

In a clear jab at the mounting levels of corruption in state-owned enterprises, Mr. Gordhan complained that certain "individuals" were using the state businesses as a "personal toy" and a source of personal profits. He promised that these state companies would not "dictate" to the government.

But he also confirmed that South Africa's cabinet had quietly given its approval to the procurement process for the controversial nuclear energy project, which could involve up to eight nuclear reactors at a cost of up to $100-billion. It has been widely reported that Mr. Zuma wants the contract to go to a Russian company because of his close relations with President Vladimir Putin. Many analysts say the country cannot afford the deal, and the Treasury has reportedly asked many tough questions about it.

In the short term, Mr. Zuma's panicky decision to dump his newly appointed finance minister and bring back the experienced Mr. Gordhan will stem the worst of the financial damage. But with the nuclear contract and the SAA deal still looming as unresolved issues, and with Mr. Zuma's personal interests still heavily involved in both deals, it's unclear if Mr. Gordhan can get a grip on the country's finances.

Mr. Zuma, meanwhile, emerges as a weakened President with less control of his ruling party. Until now, many reports have suggested that he is manoeuvring for a third term as the party's leader, even though he must step down as the country's President in 2019. He is also believed to be promoting his ex-wife, African Union chairwoman Nkosazana Dlamini-Zuma, as his successor as president, so that he can retain influence over the presidency, and she was widely thought to be the front-runner for the job. But now all bets are off, and Mr. Zuma might have to spend his time fending off a party rebellion.

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