In what was called a “midnight ministerial massacre” Pres Jacob Zuma of South Africa announced a drastic cabinet reshuffle at midnight on Thursday night, accomplishing what was known to be his goal for more than a year since summarily removing a previous finance minister.
It was common knowledge that the relationship between President Zuma and Pravin Gordhan, Minister of Finance until the end of last week, was strained because of the latter’s tight rein on the Treasury. Among the matters that Zuma and his circle had wanted to finalise, was a nuclear energy deal with Russia. It is widely speculated that with a new Finance Minister, Malusi Gigaba (an ally of Zuma and more specifically, the influential Indian Gupta family, who are suspected of improper influence over government matters), Zuma and his circle might have unfettered control over the country’s finances.
At a point when the South African currency was at its strongest for a year, the news of Gordhan’s dismissal, as well as those of his deputy Mcebisi Jonas and nine other ministers (including the Minister of Energy) and nine deputy ministers, caused the Rand to lose 7.4% against the US Dollar since news broke that Zuma had unexpectedly recalled Gordhan back from London where he was meeting with investors and ratings agencies.
Ever since the equally brusque dismissal of a finance minister, regarded as a safe pair of hands, Nhlanhla Nene, 14 months ago, fears have lingered that ratings agencies would downgrade the South African economy to junk status.
Political reaction has been swift. Unusually, three members of the African National Congress’ National Executive Committee (NEC) - including the country's deputy president - have condemned the decision made with no consultation, claiming they were presented with a fait accompli which again raises suspicions that political decisions at the highest level are made outside government.
Mzukisi Qobo, lecturer in international political economy at the University of Pretoria, writes in The Daily Maverick: “President Jacob Zuma’s recent cabinet reshuffle is confirmation of the end of rationality in our politics. The international markets will be incredulous. Gigaba [the new finance minister] is going to grope in the dark, and battle to convincingly sell the South African story to investors at home and abroad. Zuma’s faction did not appoint him for his gravity. To them he is an instrument in their hands to oil the looting machine.”
A former cabinet minister, Barbara Hogan, said that Zuma "had gone rogue". She said this at the funeral of her husband, a close associate of former president Nelson Mandela, who was outspoken against Zuma's network of patronage.
Protestors against Zuma. Photo: Ruvan Boshoff
"The effects are manifold. We have a weaker currency, we are likely to get an even weaker currency and that's going to have an impact on interest rates and inflation," says economist Mike Schussler. He continues: "South Africans are getting poorer, and on top of that they will pay more for their food, whilst there will be less money for social welfare, and under those circumstances I think the chances of further political instability have just increased."
The Archbishop of the Anglican Church in South Africa, Thabo Makgopa, has called the disruption at the Treasury “an assault on the poor”. In a statement released shortly after news broke, he states: “Who stands to lose when we can't raise foreign investment to finance growth in our country? The poor. Who stands to lose when interest rates on the money we already owe gobbles up our nation's resources? The poor.”
Gloria Serobe, executive director of an investment company aimed at rural black women, agrees: “We’re talking about communities that cannot absorb any more hardship, but now you are loading them with more hardship.”
South Africa’s debt is currently at around 50% of GDP with worrying levels of unemployment, at about 25%.
The country recorded a trade surplus of R5.22 billion [€364 million] for February with a 9.4% increase in exports and 9.7% drop in imports. However, the Business Day newspaper quotes economist Kevin Lings as saying: “Unfortunately, the slowdown in import growth largely reflects the weakness in the South African economy, rather than an improvement in import substitution." The exports were predominantly in vehicles, transport equipment, machinery, electronics and base metals, not agricultural commodities.
Opposition parties will, again, try to introduce a motion of no confidence in parliament but a pro-Zuma ANC NEC member is also the Speaker of Parliament, and given the ANC’s majority in parliament, such motions have not previously succeeded.
A previous Reserve Bank governor, Tito Mboweni, appointed by former president Nelson Mandela, calls the news “sad, depressing, tiresome and exhausting” and continues: “We cannot go on like this.”
Business Leadership South Africa (BLSA), a business collective states: “BLSA reiterates its strong belief that the manner and timing of the Cabinet changes announced by President Jacob Zuma are not in the economic interests of the country. We strongly condemn the action. It is irrational, ill-timed and completely disregards the national interest.”
It is expected that the next target will be the Reserve Bank. “As I said back in 2015,” Peter Bruce, a veteran journalist, wrote in yesterday’s Sunday Times, “there were two things Zuma had to break. The Treasury controls all the money and it is now well and truly captured. The Reserve Bank goes one better. It prints the money.”