PRAVIN TRIPLE WHAMMY
President Zuma takes charge Joins Guptas’ bank court case Cancels minister’s investment trip
FINANCE Minister Pravin Gordhan is about to be hit with a triple whammy. Yesterday, the Presidency recalled him from a meeting with investors in London. Today, he faces a court showdown with the Guptas, with President Jacob Zuma also there as an “interested party”. And to add to his woes, speculation is mounting that he and his deputy Mcebisi Jonas will soon be axed from the cabinet.
Today, Gordhan was to apply to the high court in Pretoria to clarify whether he does or does not have the power to intervene in matters between banks and their clients. However, in recently filed court papers, Zuma argues that he would be directly affected in any declaratory order that the courts hand down because Standard Bank, which is among the respondents, had asked that no member of the executive, including the president, should be allowed to intervene in the matter between the Guptas and the banks.
“Neither the president nor any of the other members of the cabinet are before this court as parties to this application launched by the minister of finance,” Zuma says in his affidavit. He was therefore “obliged” to take steps to join the proceedings, he says.
Standard Bank did not elect to join him or any other minister in the proceedings, he says, but rather had informed him of its intent and “effectively” “invited him to intervene” in the proceedings.
Zuma argues that Standard Bank cannot ask for the relief of a declaratory order barring him or any cabinet minister from intervening in the closure of the accounts because it has not joined him as a party to the proceedings.
Standard Bank’s application should be struck from the roll, says Zuma, and the bank should be ordered to pay the president’s costs.
Yesterday, the Guptas’ company Sahara Holdings filed papers in the high court in Pretoria, seeking an order that Gordhan pay for their legal costs out of his own pocket.
The rand, meanwhile, slumped 2% on the news that Gordhan and Jonas had been recalled from overseas.
And to add to the drama, a wellplaced source told The Star that at least six other cabinet ministers and deputy ministers could follow Jonas and Gordhan through the exit door.
Our source said: “This is the end of the road for Gordhan and Jonas.
“If Zuma wields the axe in such a forthright manner, it can mean only one thing: that he is unchallenged in both the national executive committee and in the cabinet, and that he has sidelined people like Gwede Mantashe and Cyril Ramaphosa.
“Things have been going well for the president in the run-up to national leadership elections for the ANC later this year: Nelson Mandela Bay was won by a pro-Zuma follower, Andile Lungisa (even though he was subsequently ordered to relinquish the post). Zuma has also received backing in eThekwini in KwaZulu-Natal.”
The source added: “Zuma only acts when he knows he will win, when he has everything in place. A cabinet reshuffle would be an indication that his opponents cannot touch him.”
The key question ahead of a reshuffle is: Who will replace Gordhan? It was said more than a year ago that ANC MP Sfiso Buthelezi would get the post, but nothing sub- sequently materialised.
Then, the swearing in of former Eskom boss Brian Molefe as an ANC MP last month again fuelled speculation that Gordhan was on his way out.
Wits University analyst Susan Booysen said Zuma had the full backing of the NEC and the cabinet in his actions.
It appears too that his foot soldiers are working behind the scenes to sway the ANC caucus in Parliament to back him.
Dirk Kotze of Unisa said the recall of Gordhan by Zuma was a show of force by the president.
He said that by recalling the finance minister from an international trip he was asserting his authority and showing everyone who was in charge.
He said the recall of Gordhan was taking the country back to December 2015, when Zuma fired then finance minister Nhlanhla Nene.
The Banking Association of South Africa asked Zuma to act in the interests of the country.
“We appeal that the Presidency and all critical stakeholders act in the best interests of the country by avoiding precipitate actions that have significant negative impact on economic growth and social development,” it said.
Opposition parties slated Zuma for his decision to recall Gordhan.
THE RAND’S bullish rally recently against the dollar came to an abrupt halt yesterday, slumping nearly 2 percent after President Jacob Zuma ordered Minister Pravin Gordhan and his team to cut short their international investor road show and head back home.
Yesterday the Treasury said Gordhan would comply with Zuma’s directive.
Fears that Gordhan could be on his way out in a rumoured cabinet reshuffle sparked panic in the market, with the banking index closing 3.05 percent lower at 7 688.31 points.
The Banking Association of South Africa managing director Cas Coovadia said they were deeply concerned about Zuma’s decision. Coovadia said business, government and labour had made significant progress in the last 18 months in building confidence among investors and rating agencies.
He said road shows were an essential element of building confidence. “This action by the Presidency rolls back the progress we have made as a country,” Coovadia said. “It also militates against the imperative of ensuring political and policy certainty.”
He said said a potential outcome of this action could be a consideration by rating agencies to downgrade South Africa to sub-investment grade status. “This would be very negative for banks and other corporates, whose ratings would follow the sovereign.”
Earlier in the day the rand weakened as much as 1.9 percent against the dollar and was 1.6 percent weaker at R12.6299 at 2.23pm, while the government’s rand-denominated bonds due in 2026 fell, driving the yield 22 basis points higher to 8.59 percent, the biggest jump since October.
The rand traded at its strongest levels since June 2015 in early morning trade, at one stage reaching R12.3146 to the dollar before backtracking to R12.7425 by 5pm. The rand has been the best-performing emerging markets currency over the last year, strengthening 23 percent against the dollar.
The recall comes at a critical juncture after South Africa narrowly escaped being downgraded to junk status last year.
Global ratings agencies, Standard & Poor’s (S&P) and Fitch both ranked the country’s sovereign ratings one notch above junk, with Moody’s ranking it two levels higher. Moody’s is scheduled to visit the country next month, with S&P expected to visit in June.
Econometrix chief econo- mist Azar Jammine said the uncertainty created by the cancellation of the road show had far reaching implications for the rand and inflationary outlook. “The inflationary pressures which are currently receding due to the strength of the rand will renew and nullify the rationale for reducing interest rates,” he said.
ETM Analytics analyst Manisha Morar said further weakening of the rand would be determined by the reasons on why Gordhan and his delegation were ordered to cut back the trip.
Nomura research analyst Peter Attard Montalto said the muted reaction on the cancellation of the roadshow suggested Zuma wanted to test the market on the possible reshuffle.
“The Presidency has seen such a strong rand and is wondering how much of a political shock it can take – they do watch these things closely. So far the market reaction has been very muted,” Montalto said.
The cancellation of the road show also came a day before a court battle was set to resume between Gordhan and the Gupta controlled company, Oakbay. Gordhan had approached the courts to seek an order that declares him not required to intervene on behalf of Oakbay over the closure of its accounts at several South African banks last year
Gordhan was re-appointed to the position in 2015 following the unceremonious sacking of Nhlanhla Nene in December of that year.
The rand plunged to a historical R16 against the dollar when Zuma named ANC backbencher David van Rooyen to replace Nene, with the banking index falling 18.54 percent and financial stocks dropping 13.36 percent.
The market capitalisation of the JSE went down 1.49 percent to R11.18 trillion‚ a loss of R169.6 billion.
Last year, when the National Prosecuting Authority said it would charge Gordhan with fraud, the rand weakened from R13.90 to R14.22 against the dollar minutes after the announcement. The charges were later withdrawn.
The South African Reserve Bank will on Thursday announce its interest rates decision. – Additional reporting by Siseko Njobeni and Sechaba ka’Nkosi