Cape Town - President Jacob Zuma is taking
a gamble as he ups the ante in his battle with Finance Minister Pravin Gordhan
for control of the nation’s finances.
If he fires Gordhan, as he told Communist Party
officials that he planned to do according to three people with knowledge of the
matter, he risks a market meltdown and a revolt by opponents in the ruling
African National Congress. If he doesn’t, he’d appear weak as he seeks to
secure his choice as successor as party leader in December. Zuma ordered
Gordhan to cancel a roadshow and to return home from London on Monday. The
turmoil has caused the rand to plummet.
Since Zuma, 74, was pressured to appoint Gordhan in 2015,
he’s feuded with him over a planned nuclear power expansion and the management
of state companies and the national tax agency. He told the communist officials
Gordhan is obstructing his policies and must be removed, according to the
people at the meeting who asked not to be identified because a public statement
hasn’t been made.
“This is a very high stakes roll of the dice that I think
Zuma won’t make easily,” Daniel Silke, director of Political Futures
Consultancy in Cape Town, said by phone. “It’s a lose-lose situation. I don’t
think the medium or long-term effects will be beneficial to him or to the ANC.”
Rand plummets
The rand fell 0.5 percent to 13.0565 per dollar by 7:33
a.m. in Johannesburg on Wednesday. That extended losses to 4.7 percent
since Gordhan was ordered to return home on Monday, more than any currency in
the world. The benchmark 10-year rand bond dropped, sending yields 2 basis
points up to 8.75 percent, the highest level since March 2.
“He knew there would be backlash but he tried to ram it
through,” University of Johannesburg associate professor of political science
Mcebisi Ndletyana said by phone from Johannesburg. “He is behaving as though
someone has a gun to his head.”
Read also: Gordhan's sacking appears imminent
Zuma, the ANC’s former head of intelligence, has
overplayed his hand before -- a move that resulted in Gordhan taking over the
finance ministry. His decision to replace then Finance Minister Nhlanhla Nene
in 2015 with little-known lawmaker caused the rand and stocks to nosedive. He
named Gordhan to the post four days later after lobbying from ANC and business
leaders.
Gordhan ordered home
On Monday, Zuma appeared to have run out of patience. He
ordered Gordhan to cancel meetings with investors in London and the US and
return home a day after the finance minister landed in the UK. The presidency
gave no reason for the decision to cancel the roadshow, which the Treasury said
had prior approval. Bongani Ngqulunga, the presidential spokesman, didn’t
answer calls to his mobile phone.
Despite his current dilemma, Zuma has proven to be a
survivor since assuming leadership of the ANC in 2007 and the country in May
2009. He’s rebuffed calls to resign after the nation’s top court said he
violated his oath of office by refusing to repay taxpayer money spent on his
private home. He also avoided going on trial for allegedly taking bribes from
arms dealers despite his financial adviser being convicted on similar charges
Disgruntlement with his leadership contributed to the
ANC’s worst-ever electoral performance in a municipal vote in August last year
and cost it control of several major cities, including the economic hub of
Johannesburg and the capital, Pretoria.
In November, the ANC’s top leadership debated a motion of
no confidence in the president but decided against putting it to the vote. Zuma
still enjoys wide support from the party’s women’s and youth leagues.
Credit rating
While Zuma has pushed for “radical economic
transformation” that he says will tackle racial inequality and poverty, Gordhan
has led efforts to keep spending in check and fend off a junk credit rating,
earning plaudits from business leaders and investors.
“It’s the drip-feed of speculation about whether Gordhan
will resign which is most damaging,” Nicholas Spiro, a partner at London-based
Lauressa Advisory, which advises asset managers, said by email. “Investors know
full well that he’s had his wings clipped and can only do so much. The fact
that he continues to be persecuted almost beggars belief given the acute
vulnerability of South Africa’s economy and creditworthiness.”
Read also: Zuma tells Communist Party Gordhan is out
The odds are mounting that Zuma won’t see out his second
term as president, which ends in 2019, and he will do anything to ensure his
political survival, according to Andre Duvenhage, a politics professor at North
West University in Potchefstroom, west of Johannesburg.
“He is now like a wounded leopard that will fight until
the bitter end,” Duvenhage said. “He is in severe trouble. My take is that he
will remove Gordhan, even though there are huge risks involved.”