JOHANNESBURG President Jacob Zuma said South Africa’s fiscal policies will not change and that people should remain calm after its credit rating was cut to junk following a political reshuffle that he defended as bringing new blood into the cabinet.
But moments later, the ANC-allied Cosatu, South Africa’s largest trade union, said Zuma must step down after his change of finance ministers triggered the credit rating downgrade.
In his first public remarks about Thursday’s midnight reshuffle, Zuma on Tuesday also urged his cabinet to reach out and reassure international investors following the dismissal of former finance minister Pravin Gordhan.
Gordhan’s sacking has outraged opponents and some political allies of Zuma, undermining his authority as president, and threatens to split the African National Congress (ANC) that has governed South Africa since the end of apartheid.
“With regards to the finance portfolio, we reiterate that while the political leadership has changed, government’s overall policy orientation remains the same as derived from the governing party, the African National Congress,” Zuma said.
“We expect the changes to add renewed energy into Cabinet and the executive as a whole,” he said referring to the cabinet reshuffle, which he said had added “many young ministers”.
The departure of Gordhan, a totem of policymaking stability for many foreign investors whom Zuma thanked on Tuesday for his service, has rocked the rand currency and other local assets.
His sacking and that of former deputy finance minister Mcebisi Jonas were also cited by Standard & Poor’s as a reason for its cut in South Africa’s credit rating on Monday to BB+, below investment-grade and implying higher borrowing costs. [L5N1HB649]
The rand, which fell as much as 1.9 percent at the start of trading on Tuesday, trimmed some losses to trade 0.2 percent lower after Cosatu called on Zuma to step down. The volatile currency weakened again to trade 0.5 percent lower.
Thanking Gordhan and Jonas, Zuma said his government remains committed to measured fiscal consolidation that stabilises rising public debt, but would also aim to radically transform the economy to include the black majority.
“We thus remain firm in our call that the economy needs to include the black majority in the ownership and control,” he said.
Zuma urged calm, saying public disagreements within the government “demoralise our people and create confusion”. This was a “serious weakness and we shall attend to it within renewed vigour”, he added.
But Cosatu said it no longer believed in Zuma’s ability to lead the party and the country, and that it wanted to restructure its alliance with the ANC.
After S&P announced its rating cut, rival Moody’s said it was reviewing the Baa2 credit rating it assigns South Africa, two notches above junk, a process that could take 30 to 90 days.
Zuma’s dismissal of the respected Gordhan, seen for some time by pundits as the target of political pressure from a faction allied to the president, threatens to split the upper echelons of the ruling ANC.
The sacking has been publicly criticised by half the ANC’s “Top Six” officials, including Deputy President Cyril Ramaphosa and ANC Secretary General Gwede Mantashe. Zuma, who is also part of the group of six leaders, has his vote and the support from the other two members and some groups within the ANC.
(Reporting by Tanisha Heiberg, Olivia Kumwenda-Mtambo, Nqobile Dludla and Mfuneko Toyana; Writing by James Macharia; Editing by Catherine Evans)