Pravin Gordhan has been sacked as South Africa’s finance minister by President Jacob Zuma late on Thursday, sparking a further sell-off of the rand and fuelling investor concerns about the country’s political and economic direction.
The move by Zuma – which is part of a wider cabinet reshuffle – saw the country’s currency, the rand, plunge by around 5% overnight after the news was announced. Earlier in the week, Gordhan was ordered home from an investor roadshow of the UK and the US after Zuma allegedly received a security dossier claiming that Gordhan and his deputy Mcebisi Jonas – who has also been sacked – were plotting to overthrow the government during their trip.
However, the validity of the report has publicly been rejected by members of the ruling African National Congress (ANC) party and South African Communist Party (SACP), which is a partner in the tripartite alliance together with the ANC and the Congress of South African Trade Union.
I disagree with the removal of Gordhan & Jonas based on a suspect intelligence report . Their committment to the NDR is unquestionable .
— Jackson Mthembu (@JacksonMthembu_) March 31, 2017
Mapaila: We reject the intended reshuffle, including the motives for it. #SACP
— SACP (@SACP1921) March 30, 2017
Responding on Friday during a press conference, Gordhan called the claims in the report were “absolutely nonsense” and said that “this is not the basis to fire […] a minister of finance”. The former finance minister also responded to claims that he had secret meetings with unknown people during the roadshow in an effort to undermine Zuma’s government.
“Let me say emphatically and categorically, there were no such meeting,” Gordhan said. “If anyone wants to tell us (Gordhan and Jonas) not to do this job then just tell us not to do it. Nothing has to be manufactured to create an environment where we are discredited to serve another purpose outside of that that is claimed.”
The sacking of the internationally respected finance minister brings an end to a long-running rivalry with the President that has fuelled factionalism within the ruling African National Congress and crippled investor confidence in Zuma’s scandal-prone leadership. The sacking is likely to lead to a further reassessment of the country’s credit rating, which has been hovering above junk status for months, according to John Ashbourne, Africa economist UK-based Capital Economics.
“Attention in the markets has also turned to the risk that Mr. Gordhan’s sacking will cost South Africa its investment grade status,” Ashbourne said. “This seems plausible – ratings agencies have stressed political risks as much as purely economic ones.”
“But, as we’ve argued for some time, a downgrade would not, in and of itself, lead to an immediate jump in borrowing costs [because] South Africa’s debt ratio is not particularly high,” he added. Gordhan’s position has been the focus of repeated speculation since his surprise appointment in December 2015, which was seen as an attempt by Zuma to soothe markets following the disruptive sacking of respected predecessor Nhlanhe Nene and short-lived replacement David Van Rooyen.
Since taking the helm of the country’s embattled economy, Gordhan has attempted to bring public finances under control and maintain the country’s precarious credit rating in the face of repeated Presidential scandals and weak growth. Yet despite Gordhan’s credibility in business circles and reputation as a safe pair of hands, he never enjoyed the support of Zuma, who critics say longed to replace Gordhan with a more pliant colleague.
As Gordhan battled vested interests in his bid to reform state-owned companies and ward off the threat of a downgrade to junk status, his time in office was repeatedly undermined by political intrigue and legal battles. The finance minister has recently been caught in a dispute between the Guptas, a controversial Indian business family close to the President, and a group of banks that have limited their banking activity.
Gordhan launched a court action as finance minister insisting that he should not interfere in matters between banks and their clients, while the Guptas countered with an affidavit arguing that he should be personally present in court, according to South Africa’s The Times newspaper. That was only the latest in a series of legal woes that dogged his term in office.
In October, Gordhan was charged with fraud following allegations that he approved an early pension payment to a South African Revenue Service employee while leading the tax authority. The charges, which his supporters argued were politically motivated and orchestrated by factions close to the Presidency, were dropped only weeks later. Allegations that he set up a clandestine spying unit while leading the same organisation have similarly come to nought.
Since resuming the role he first held from 2009-2014, Gordhan has adopted fiscally conservative policies, cracking down on government spending while striving to boost economic growth that analysts say is insufficient to dent South Africa’s rampant unemployment. In his most recent budget update in February, Gordhan predicted that growth this year would be an improved 1.7%, in the finance minister’s words, “too low and highly inadequate.” However, Thursday’s dramatic events have cast a shadow over South Africa’s economy once again.