Zuma seen as clinging to power whatever the cost
STUNG by his ruling party’s worst electoral performance since the end of apartheid, President Jacob Zuma is going for broke in a battle to maintain his grip on power. The first casualties have been the nation’s rand and bonds.
First came Monday’s announcement that he planned to run a committee that will oversee the nation’s state-owned companies. Then Finance Minister Pravin Gordhan, with whom Zuma has had a fractious relationship, said he had received “correspondence” from the special police unit, the Hawks.
The Daily Maverick website said he might face charges over allegations he oversaw an illicit unit to spy on politicians when he ran the state tax agency.
Gordhan was determined to stay in his position, a person familiar with the situation said.
“Zuma’s response to the election setback and the response of many around him has been to dig in deeper and basically go on a mission of revenge,” Daryl Glaser, a politics professor at the University of Witwatersrand, said yesterday.
Avoid downgrade
Gordhan, 67, has tried to keep the rand bears at bay and avoid a credit rating downgrade since he was named finance minister in December after Zuma roiled markets by firing Nhlanhla Nene from the position and replacing him with a littleknown lawmaker.
Gordhan has said Zuma’s plans to add 9 600 megawatts of nuclear energy to the national grid can only go ahead if they are affordable and demanded the dismissal of the management of loss-making SAA, and the sacking of tax chief Tom Moyane, whom he accused of insubordination.
With Zuma, 74, scheduled to step down as leader of the ANC late next year and as the nation’s president in 2019, the president and his allies are looking after their own economic interests and see Gordhan as an obstacle, according to Peter Attard Montalto, Nomura International’s senior emerging markets strategist.
“The National Treasury needs to be onside and not a roadblock as it is now,” Montalto said. “They need guarantees for SAA, they need a sign off on nuclear and they need the National Treasury to stop blocking tenders and contracts.”
Both the Treasury and the Presidency said they would issue statements later yesterday. Gordhan’s lawyers referred comments to the Treasury.
The rand declined as much as 1.2 percent yesterday before trading 0.2 percent weaker at R14.0277 a dollar by 11.29am in Johannesburg, extending Tuesday’s 3.1 percent plunge and heading for the weakest level since June 28.
Yields on benchmark government bonds due in December 2026 surged 42 basis points to 8.94 percent, the most since Zuma fired Nene in December.
“Zuma has little to lose after the ANC’s unprecedented losses in the local elections,” said Anne Frühauf, the vice-president at New York-based risk adviser Teneo Intelligence. “The president will be keen to protect his interests, even if it means risking major market fallout.”
The Sunday Times reported in May that Gordhan might face dismissal and arrest on espionage charges for setting up the SA Revenue Service’s National Research Group to spy on politicians, including the president.
Gordhan denied any wrongdoing and said he was being harassed by people intent on manipulating the justice system for political gain. At the time, the Presidency and the Hawks denied those reports that Gordhan would be arrested or replaced.
Zuma, the ANC’s former head of intelligence, wields influence over the Hawks through his justice minister who appoints the head of the unit. Gordhan alleged in May that the unit was being manipulated for political reasons, but didn’t specify that Zuma was involved. Hawks spokesman Hangwani Mulaudzi declined to comment.
With Zuma, 74, scheduled to step down as… the nation’s president in 2019, the president and his allies are looking after their own economic interests.
“The Hawks and other arms of the state that do Zuma’s bidding are claiming to be doing so entirely independently,” Glaser said.
“But if you look at the total picture, people who are competent in doing the best job possible seem to be getting harassed and persecuted by people who have things to hide and are on the make. It’s difficult to resist the interpretation that what is going on is high-level political interference.”
While the ANC lost control of key municipalities including Pretoria and Johannesburg in August 3 local elections, Zuma continues to have support from the party’s decision-making National Executive Committee, which is stacked with his allies.
“After the thrashing it received in the local elections, you’d think the ANC’s leadership would do its utmost to restore unity in the party,” Nicholas Spiro, a partner at London-based Lauressa Advisory, which advises asset managers, said.
“This is patently not the case. The only thing stopping Gordhan throwing in the towel is the fear that the financial fallout would be severe.” – Bloomberg