Johannesburg - South African President Jacob Zuma fired
Finance Minister Pravin Gordhan and eight other cabinet members in a
high-stakes power play that may threaten his own presidency and place the
nation’s investment grade credit rating at risk.
Zuma replaced Gordhan, with whom he feuded over state
finances, with Home Affairs Minister Malusi Gigaba, who has no financial or
business experience. He also named lawmaker Sfiso Buthelezi to take over from
Mcebisi Jonas as deputy finance minister. The cabinet overhaul came in a
late-night move that threatens to split the 105-year-old ruling African
National Congress and trigger a revolt against the president. The rand extended
losses, heading for its worst week in more than a year.
“Those walking into the Treasury tomorrow will not
reassure anyone that the top institution protecting South Africa’s fiscal
stability is in safe hands,” said Anne Fruhauf, vice president at New
York-based risk adviser Teneo Intelligence. “The move invites a massive
backlash from the anti-Zuma faction.”
Zuma’s decision to replace Gordhan, popular with
investors because of his efforts to rein in spending, came in the face of
opposition from three of the top six members of the ANC and its alliance
partner, the South African Communist Party. Some cabinet ministers were said to
be ready to turn against the president, who’s survived a series of corruption
scandals and presided over the party’s worst-electoral performance since the
end of apartheid in 1994 in municipal elections in August.
ANC divisions
“This will exacerbate the existing divisions in the ANC,”
Daniel Silke, director of Political Futures Consultancy in Cape Town, said by
phone. “We are really in for a roller-coaster ride in terms of ANC cohesion.”
Gordhan’s ouster marked the end of a stormy relationship
that began almost as soon as Zuma named him as finance minister in December
2015, four days after the president triggered a sell-off in the rand by
replacing the respected Nhlanhla Nene with a little-known lawmaker. He clashed
with his boss over the affordability of building nuclear power plants and the
management of state-owned companies.
While removing an opponent in a key position may
strengthen Zuma’s grip over the government in his final year as ANC leader, a
backlash within the party would galvanize his detractors as he seeks to secure
his choice as successor in a party election in December.
The rand tumbled, weakening as much as 2.6 percent
against the dollar and was at 13.4641 by 9 a.m. in Johannesburg on Friday. It
has plunged 7.6 percent this week, the most of more than 140 currencies tracked
by Bloomberg. Yields on benchmark rand-denominated government bonds due
December 2026 soared 45 basis points to 8.96 percent.
Read also: Zuma's actions 'put SA into turmoil' – BASA
“Unlike when Nene was fired, the opposition to Zuma
within his government is now much stronger, presaging a full-blown political
crisis,” said Nicholas Spiro, a partner at London-based Lauressa Advisory,
which advises asset managers. “The rand will be punished even more severely and
the whiff of a junk rating is in the air.”
Zuma made 20 changes to his administration, capping a
dramatic week when he ordered Gordhan on Monday to cancel a series of meetings
with investors in the UK and the US and return home. The South African
Communist Party, an ally of the ANC, slammed the decision to recall Gordhan and
warned against firing him.
The fourth finance minister in 15 months, Gigaba, 45, was
appointed as minister of home affairs in May 2014. A former president of the
ruling party’s youth wing, he trained as a teacher and holds a masters degree
in social policy. He previously served as the minister of public enterprises,
deputy home affairs minister and as a lawmaker for the ANC.
Cabinet shake-up
The other cabinet changes announced by Zuma include the
appointment of Mmamoloko Kubayi as energy minister to replace Tina
Joemat-Pettersson, Joe Maswanganyi as transport minister in place of Dipuo
Peters and Tokozile Xasa as tourism minister in place of Derek Hanekom.
Several ministers were given new portfolios including
Fikile Mbalula, who becomes police minister, Nathi Nhleko, who was named
minister of public works, and Thulas Nxesi, who was appointed minister of sport
and recreation. Ayanda Dlodlo will take over the communications portfolio from
Faith Muthambi, who becomes minister of public service and administration.
Hlengiwe Mkhize succeeds Gigaba as home affairs minister.
Zuma didn’t bring in Nkosazana Dlamini-Zuma, the former
head of the African Union Commission and his ex-wife, who is seen with Deputy
President Cyril Ramaphosa as a leading contender for ANC president at a party
electoral meeting at the end of the year.
Political survivor
Zuma has survived a series of scandals since he became
president in 2009. The Constitutional Court last year ruled that he broke his
oath of office by refusing to repay taxpayer’s money spent on his private home.
The nation’s graft ombudsman also implied that he allowed
members of the Gupta family, who are in business with his son, to influence
cabinet appointments and the issuing of state contracts. Zuma and the Guptas
deny having ever intentionally broken the law.
The cabinet changes will leave South Africa’s credit
rating vulnerable. Moody’s Investors Service, which rates South Africa’s debt
at two levels above junk and with a negative outlook, is scheduled to publish a
review of the nation’s creditworthiness on April 7. S&P Global Ratings and
Fitch Ratings kept their assessments at the lowest investment grade late last
year.
“We expect the current explosion of political turmoil and
its resulting economic and fiscal uncertainties to catalyse sovereign rating
downgrades,” said Phoenix Kalen, director of emerging-market strategy at
Societe Generale in London.
The two biggest opposition parties, the Democratic
Alliance and the Economic Freedom Fighters, have filed for votes of no
confidence in Zuma in parliament.
“This as an open attack on the Treasury to replace people
who are anti-corruption with people loyal to Zuma to help the Zuma faction win
in December,” said Peter Attard Montalto, an economist at Nomura International in
London. “This is an attack on the institution of National Treasury and as such
will trigger multiple downgrades.”