President Zuma prepares to remove vocal critics in an upcoming cabinet reshuffle and to seize control over state-owned enterprises in a bid to approve key spending projects and to influence his own succession.
On 23 August, police summoned Finance Minister Pravin Gordhan to answer questions over the legality of an alleged ‘rogue’ unit in the South African Revenue Service (SARS), which was previously headed by Gordhan. In reaction, the rand currency fell by 4%, before slightly recovering. Markets reacted in the same way as in February, when the allegations were first made public. Pravin Gordhan’s attempts to instill new confidence in the country’s economy has become the focus of an emerging coalition between moderate members of the governing African National Congress (ANC) party and business leaders against the leadership of President Jacob Zuma.
However, Gordhan is being frustrated by allies of President Zuma. State investigative and prosecutorial unit ‘The Hawks’, which is led by Zuma ally Berning Mthandazo Ntlemeza, has opened an investigation into alleged wrongdoing by Gordhan when he headed the SARS between 1999 and 2009. Gordhan has denied wrongdoing. The SARS is now led by another Zuma ally, Thomas Moyane, who has repeatedly and publicly challenged Gordhan’s authority. The increasingly intense dispute between Pravin Gordhan and President Zuma is highly politically motivated as its outcome will have strong implications on Zuma’s eventual succession. The dispute also has a seriously negative impact on Gordhan’s attempts to avert further downgrades of South Africa’s investment rating later in 2016. EXX Africa’s forecast that an August economic rally would be short-lived has proven to be accurate.
Meanwhile, President Zuma is gearing up for a cabinet reshuffle in which his critics are most likely to be side-lined. There have been calls for the suspension from the ANC of the party’s entire leadership in Gauteng, where the ANC suffered heavy losses in recent municipal elections. President Zuma is also likely to remove members of alliance partner the South African Communist Party (SACP), such as Blade Nzimande and Rob Davies, who have criticized him. Pravin Gordhan is likely to be replaced, which could trigger another collapse in the value of the rand and stock markets, as it did in December 2015. The ANC Youth League, who are loyal to President Zuma, have also called for the party’s elective congress, slated for December 2017, to be brought forward to late 2016. This would catch opponents of President Zuma off guard and scupper any potential formation of a rival political slate to succeed President Zuma as party president or to thwart any attempts for Zuma to run for a third term as ANC leader.
On 22 August, the cabinet also announced the formation of a new committee on state-owned enterprises (SOEs) headed by President Zuma. The committee would have the authority to overrule the finance minister on key spending decisions, such as the proposed restructuring of a USD624 million deal with Airbus Industrie made by national carrier South African Airways (SAA), whose chairperson Dudu Myeni is a close ally of President Zuma. Gordhan has opposed the financing deal, while he has also omitted appropriate spending plans in his latest budget for a number of Zuma’s flagship policies, such as a USD90 billion nuclear power expansion and the roll-out of national health insurance.
Risk implications: The ANC faction around President Zuma is leveraging the party’s poor performance in the municipal elections as an excuse to impose discipline and unify around the president. President Zuma will have two remaining ambitions in his tenure as national president. Firstly, his government will seek approval for high spending projects, such as the SAA financing deal and the procurement of Russian-made nuclear reactors, as lucrative rent-seeking opportunities. President Zuma will also become more ruthless towards his critics and many opponents of his plans will be dismissed in upcoming cabinet reshuffles.
Secondly, President Zuma will seek to influence his own succession as party president (unless he runs for a third term) and thus as national president before the next general elections in 2019. His favorite to succeed him is outgoing Chairperson of the African Union Commission Nkosazana Dlamini-Zuma. Dlamini-Zuma will depend on the endorsement and political backing of President Zuma, who is her ex-husband, to ensure the support of rural provincial ANC leaders and the party’s Youth and Women’s Leagues. The relative political weakness of the apparent frontrunner is likely to allow more succession candidates to emerge and seek the support of defeated ANC structures in large Gauteng cities, which President Zuma will seek to avoid through cabinet reshuffles and suspensions of opponents from the party.
EXX Africa is a specialist intelligence company based in Johannesburg, South Africa