South Africa's political and economic stability stumbled further into uncertain territory Tuesday as speculation rose over the potential dismissal of the county's Finance Minister, Pravin Gordhan.
Eyebrows were raised and the rand fell Monday as President Jacob Zuma suddenly recalled Gordhan and National Treasury Director General Lungisa Fuzile from an investor roadshow to the U.K. and U.S.
The President gave no justification for the decision, which has done little to pacify markets and commentators.
Media reports from Bloomberg suggest that President Zuma told senior officials Monday evening that he plans to dismiss Gordhan, while analysts anticipate a potential wider cabinet reshuffle as the President attempts to overhaul the ruling African National Congress (ANC) ahead of his scheduled retirement at the end of this year.
The rand (ZAR) weakened as much as 2.9 percent and was at 12.97 to the dollar in early U.S. trading Tuesday. Before Monday's announcement, the rand had been the world's best-performing currency over the last 12 months, despite taking a number of hits when fraud charges were brought against – and later withdrawn from - Gordhan.
President Zuma and Gordham have been at loggerheads over economic policy over recent months. President Zuma hopes to embark on an economic overhaul agenda while Gordhan, seen as something of a symbol of stability, has led efforts to trim spending and recover the country from negative credit ratings.
Any move to dismiss Gordhan is therefore likely to cause greater currency drops and further damage the country's economic outlook, suggests Kevin Loane, economist at Fathom Consulting.
"I think the reaction in financial markets highlights the possible economic impact," Loane told CNBC via email.
"The rand was sold off yesterday, as investors are uncertain about the future direction of policy. If Mr Gordhan is indeed replaced, that would probably lead to a further depreciation of the rand, which if sustained will feed through into higher inflation and reduced investment."
The timing of the recall is particularly curious, noted Loane, given anticipation of a cut in interest rates, however, according to a research note from Teneo Intelligence, the move could indicate the President's intentions to "reassert his waning authority".
The South African Treasury Department and the Head of President Zuma's Private Office, Bogani Majola, opted to provide no comment when contacted by CNBC.
Should the President opt to replace Gordhan, however, it's not clear who will become his successor.
"This is a high stakes gamble from Zuma given that there are no obvious, above all credible, alternatives to Gordhan as Finance Minister, and unsurprisingly the ZAR has taken a tumble and bond yields have jumped higher, given that Zuma appears to have thrown any caution to the wind," Marc Ostwald, FX, Rates & EM Strategist at ADM Investor Services International told CNBC.
"The next 24-48 hours will be critical," noted Anne Fruhauf, Senior Vice-President, Teneo. "If Gordhan goes (along with SACP ministers and other presidential opponents), Zuma risks a serious backlash within the party. And investors would have little reason to trust a new Treasury leadership."