President Jacob Zuma removed Finance Minister Nhlanhla Nene from his position on Wednesday, sending the currency to a record low as markets responded to the shock axing.
Member of Parliament David Van Rooyen was appointed in his place, Zuma said in a statement.
He gave no details on why Nene, who has been serving as head of the treasury for just under two years, was dismissed.
"I have decided to remove Mr Nhlanhla Nene as Minister of Finance, ahead of his deployment to another strategic position," the president said in a statement.
The currency plunged over 2.5 percent to a record low 14.9500 per dollar following the announcement.
Nene's dismissal comes on the heels of a credit rating downgrade to just one notch above sub-investment grade by Fitch last Friday.
Fitch downgraded the debt of Africa's most industrialised economy to BBB-, the lowest investment grade category, citing the slowing economy and rising debt.
South Africa narrowly avoided slipping into a technical recession in the third quarter, growing by a meagre 0.7 percent after contracting in the second of the year.
Since his appointment in mid-2014 Nene has emphasized the need to cap government spending, reign in bailouts to state-owned firms, and limit the size of wage increases to government employees.
Government spending on public sector wages and welfare, accounting for the largest slice of government expenditure, has long been seen as the ruling African National Congress's chosen method to stay in power as it looses popular support.
The Treasury and the Presidency were not immediately available for comment.