Zuma’s recall of Gordhan sparks cabinet change speculation

South African Finance Minister Pravin Gordhan plans to return home after President Jacob Zuma ordered him to pull out of a roadshow with investors and ratings agencies in London, heightening concern that he’s preparing to change his cabinet.

Sam Mkokeli

Pravin Gordhan
Pravin Gordhan

The rand plunged after Zuma told Gordhan and his deputy, Mcebisi Jonas, to cancel the week-long roadshow in the U.K. and the U.S. Bongani Ngqulunga, the presidential spokesman, gave no reason for the decision in a statement on Monday. Gordhan will arrive in South Africa on Tuesday, the Treasury said in a statement.

Zuma’s order came a day after Gordhan left South Africa on Sunday to lead a delegation that included business executives and labor union representatives. Early Monday the officials met with some investors in London. The roadshow was later canceled, Dennis George, the general secretary of the Federation of Unions of South Africa who was on the trip, said by phone.

Speculation that Gordhan is on the verge of being fired has swirled for months, as he clashed with Zuma over the management of state companies and the national tax agency. While Gordhan has led efforts to keep spending in check and fend off a junk credit rating, Zuma wants to embark on “radical economic transformation” to tackle racial inequality and widespread poverty.

‘Live-Wire Situation’

“Whether this is a reshuffle or not, the timing is definitely picked to inflict pain and embarrassment on an already live-wire situation,” said George Herman, chief investment officer at Citadel Investment Services in Cape Town. “There is no other practical reasoning for the timing of this.”

Moody’s Investors Service, which rates South Africa’s debt at two levels above junk and with a negative outlook, is scheduled to publish a review of the nation’s creditworthiness on April 7. S&P Global Ratings and Fitch Ratings Ltd. kept their assessments at the lowest investment grade late last year.

The rand weakened 2.6 percent against the dollar to 12.7788 at 4:41 p.m. in Johannesburg. The government’s rand-denominated bonds due 2026 fell, driving the yield 35 basis points higher to 8.71 percent, the biggest jump since October.

If Gordhan or Jonas are fired, “the selloff will be vigorous,” said Jonathan Hertz, chief executive officer of Peregrine Holdings Ltd., which has 105 billion rand in assets under management. “There will be a shudder in the market. I see a big pullback. I think you could see 14, I don’t think you will see 15.”

The recall “is not a positive omen and raises the level of policy uncertainty,” said Raymond Parsons, a professor at the North West University’s School of Business and Governance. “The rand has already fallen sharply because of the uncertainty which has now opened up around the political futures of both minister Gordhan and deputy finance minister Jonas.”

Zuma, who is due to step down as head of the ruling African National Congress in December and as president in 2019, has previously downplayed suggestions that he intends to reorganize his cabinet and fire Gordhan.

‘Radical Step’

“It’s quite a radical step to recall the minister and his deputy in the middle of an international roadshow,” Mike Davies, the founder of political advisory company Kigoda Consulting, said by phone. “This doesn’t necessarily mean a reshuffle is now more imminent than it was before, but it shows that tensions clearly exist in the cabinet.”

The trip was properly authorized, Gordhan’s office said. Treasury spokeswoman Yolisa Tyantsi referred queries to the presidency when contacted by text message and email. Ngqulunga didn’t answer calls to his mobile phone.

Sahara Computers, owned by friends of Zuma, the Guptas, filed an application demanding that Gordhan be present in court on Tuesday for a hearing on whether the minister can be forced to order banks to reopen bank accounts of companies associated with the family. Gordhan asked for the state attorney to appear for him.

“Tensions are already high between Zuma and Gordhan and so this will just serve to deepen their mutual hostility,” said Susan Booysen, a professor at the University of Witwatersrand’s School of Governance. “Zuma is watching for any foot fault by Gordhan and Jonas to have a pretext to fire them. Cabinet members are routinely given permission for overseas visits and if they do so without authorization, a simple phone call would suffice to chastise them.” – Bloomberg

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1 Comment

  1. Africans are cursed. Everything they touch turns into dust.

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