Cape Town – President Jacob Zuma's decision to bid Finance Minister Pravin Gordhan home from an investor roadshow in London was met with condemnation on Monday, as the rand weakened amid renewed speculation that the treasury chief may be fired.
The Banking Association of SA warned that the step could lead to a credit rating downgrade, which Gordhan has worked to avoid since returning to the helm of National Treasury in December 2015.
"This action by the Presidency rolls back the progress we have made as a country. It also militates against the imperative of ensuring political and policy certainty," the MD of the group, Cas Coovadia, said.
"Another potential outcome of this action could be a consideration by rating agencies to downgrade SA to sub-investment grade status. This would be very negative for banks and other corporates, whose ratings would follow the sovereign."
The rand on Monday fell by more than four percent against the dollar and just under four percent against the pound and the euro. The Democratic Alliance termed Zuma's decision "bizarre" and said it bode ill for the economy.
“The instruction to cancel the international investor roadshow without explanation is so bizarre that it appears, at best, calculated to humiliate the minister or, at worst, to suggest that the minister is about to be fired in a cabinet reshuffle,” DA finance spokesman David Maynier said.
The Presidency on Monday, issued a terse statement confirming that Gordhan and finance director general Lungisa Fuzile had been told to return home, and that a roadshow in the United States for which Deputy Finance Minister Mcebisi Jonas would have departed on Monday evening had been cancelled.
Zuma's office did not give and explanation and did not answer calls. National Treasury confirmed that Gordhan and Fuzile would return on Monday evening and arrive back in South Africa on Tuesday morning.
The pair “are preparing to return tonight (on Monday night) from the UK and are expected to arrive in South Africa tomorrow (on Tuesday) morning,” the treasury said in a statement.
They had been due to return on Wednesday, and had further meetings scheduled in London for Tuesday. National Treasury sources dismissed suggestions that Gordhan did not have authorisation to be abroad, pointing out that the Presidency's directive had noted that he was "rescinding" permission for the trip.
"You don't expressly rescind permission if you have not given it," one said. Gordhan was earlier reported to have told Bloomberg that he would conclude his meetings in London. Treasury sources said the minister was scheduled to go straight into meetings after landing.
The Institute for Race Relations said it appeared that Zuma had sought to humiliate Gordhan as part of the complex infighting within the ruling party.
"IRR analysts believe the move to be a political power play by factions of the African National Congress (ANC) aligned with the President, and what is loosely described as the Eastern Bloc of that party. The move is designed to publicly humiliate and weaken the so-called Western Bloc of the ruling party that is aligned with the Deputy President and the Minister of Finance."
It added that Zuma may be watching how the markets react to recalling Gordhan from abroad, and that this may inform a decision by the president to reshuffle his Cabinet.
"Depending on how markets react to the power play, it could be a precursor to the axing of the minister of finance and a broader cabinet reshuffle. Should such a reshuffle occur in favour of the Eastern Bloc of the ANC, this may lead to significant swings in government policy on investment protection, property rights and fiscal prudence."
Monday’s directive from the presidency came after more than a year of tension between Zuma and the finance minister, who last year described a decision to charge him with fraud as “political mischief”.
The matter never made it to court as the charges, which related to the re-employment of a top official at the South African Revenue Services, were withdrawn some weeks after they were brought.
Gordhan has openly and frequently referred to the uncertainty of his situation.
Earlier this month, he told Parliament’s standing committee on public accounts that National Treasury came under political pressure when it was obliged to intervene when other government departments failed to do their job.
“We get into this sloganeering … contain Treasury, take over Treasury. You have all heard it, and I don’t think it is child’s play at the end of the day.” He added: “I am still standing.”