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Zuma fires Gordhan as S Africa Treasury chief

President Jacob Zuma has sacked Pravin Gordhan, his finance minister, and eight other cabinet members, threatening turmoil for South Africa’s fragile economy and setting the stage for the biggest crisis yet for the ruling African National Congress under his leadership.

Mr Zuma’s decision to fire Mr Gordhan as part of a late-night cabinet reshuffle sent the rand down 2 per cent on Friday, taking the currency’s decline this week to 7 per cent — its worst fall since late 2015. Bank shares on the Johannesburg Stock Exchange plummeted 4.5 per cent.

Mr Zuma used the reshuffle to purge growing numbers of the president’s critics, but the move risks triggering a revolt within the ANC that could fracture the party two years before national elections due in 2019.

Malusi Gigaba, the home affairs minister, an ally of Mr Zuma’s, will replace Mr Gordhan as South Africa’s fourth finance minister in two years, the president said.

“I have decided to make changes to the national executive in order to improve efficiency and effectiveness,” Mr Zuma said, adding that he would direct the new ministers to “work tirelessly with their colleagues to bring about radical socio-economic transformation”.

But the sacking of Mr Gordhan, who was leading efforts to restore investor confidence in South Africa, drew widespread condemnation, with business leaders warning that it would damage the struggling economy and hasten a credit ratings downgrade to junk status.

Mr Zuma’s actions “have put our country into turmoil,” said Cas Cavoodia, head of the Banking Association of South Africa.

The CEO Initiative, a grouping that includes the chief executives of Investec, Nedbank, Standard Bank and the JSE said the reshuffle and the manner in which it was taken, “is likely to cause severe damage to an economy that is in dire need of growth and jobs”.

A year-long power struggle between Mr Zuma and his finance minister over Treasury efforts to root out cronyism in state-owned companies, and the influence in government of the Gupta business family, Mr Zuma’s friends, came to a head this week when the president ordered Mr Gordhan back from an overseas investment roadshow.

Mr Zuma, whose presidency has been dogged by scandals and allegations that corruption has flourished under his watch, pressed ahead with the reshuffle despite mounting opposition against the move, including from within the ANC and its allies.

Gwede Mantashe, the ANC’s secretary-general, said on Friday that the process used to remove Mr Gordhan and the other ministers made him “jittery and uncomfortable”.

“We were given a list that was complete, and in my own view as a secretary I felt like this list has been developed somewhere else and was given to us to legitimise it,” Mr Mantashe told Talk Radio 702.

The South African Communist party, which is part of an ANC-led alliance said it had objected to his plans when Mr Zuma told its leaders about his decision on Monday. The president cited an intelligence report to accuse Mr Gordhan of plotting to undermine him, the SACP said on Thursday.

The reshuffle is a big step in an effort by Mr Zuma, who has been accused of allowing the ANC to be taken over by a faction that uses patronage to secure power, to firm up his power base before a party vote in December to elect his replacement as ANC president.

Mr Zuma’s opponents may respond to Mr Gordhan’s firing by holding a no-confidence vote in parliament if enough ANC MPs are left disgruntled by the reshuffle, analysts said.

Mr Gordhan was appointed in December 2015 to restore stability after Mr Zuma abruptly replaced Nhlanhla Nene as finance minister with a little-known backbencher, a decision the president reversed four days later after the rand and South African equities tumbled.

Respected by international investors, Mr Gordhan frustrated Mr Zuma’s push to approve expensive new nuclear reactors and sought to rein in spending.

But his increasing confrontation with the Guptas, including a court case heard this week over banks closing the accounts of the family’s companies, led to Mr Gordhan’s deepest rift with the president.

His deputy, Mcebisi Jonas, was also fired by Mr Zuma and replaced with Sifiso Buthelezi, former chair of the state-owned passenger rail agency. Bankers in Johannesburg expected several Treasury officials to leave alongside Mr Gordhan in the event of him being fired.

Via FT