A power struggle at the highest levels of South Africa’s government has pushed the country into economic turmoil, with its currency plummeting and its top finance officials in imminent threat of dismissal.
President Jacob Zuma shocked the nation this week by ordering Finance Minister Pravin Gordhan and deputy finance minister Mcebisi Jonas to cancel their investment roadshow in Britain and the United States and to return home immediately.
Mr. Gordhan and Mr. Jonas had just arrived in London on Monday, trying to reassure foreign investors that South Africa was now a stable country with an improving economy. Instead, the opposite signal was sent to investors, who saw their meetings suddenly cancelled with no explanation.
Mr. Zuma announced the move in a terse one-line statement, giving no reasons. The statement said he had “instructed” the two officials to cancel their roadshow and “return to South Africa immediately.”
Two days later, he has still not explained the bizarre move, but the country has been consumed by rumours that Mr. Zuma will fire the two officials as part of a larger factional battle to get rid of his opponents and install his allies in cabinet. His strategy is to elevate his ex-wife, Nkosazana Dlamini-Zuma, to become leader of the ruling party, the African National Congress, at a December conference when his own term expires.
By leaving his finance officials in limbo without any explanation of his reasons or their fate, Mr. Zuma has thrown the country into uncertainty. “This action has pulled the rug from under our feet,” said a statement by Business Leadership South Africa, a group representing the country’s biggest corporations.
“The damage to investor sentiment to South Africa as a result of the President’s decision should not be underestimated,” it said. “At a time when investors need stability, certainty and evidence of progress, this action sends exactly the opposite message.”
Mr. Gordhan and Mr. Jonas are widely seen as a bulwark against corruption in the national treasury. They have repeatedly clashed with Mr. Zuma’s faction, including his close allies, the powerful Gupta brothers, who have a business partnership with Mr. Zuma’s son. In an affidavit, Mr. Jonas has alleged that the Guptas offered him a bribe equivalent to $46-million (U.S.) if he co-operated with them.
South Africa’s currency, the rand, had been gaining value in recent months, reaching a 20-month high on Monday morning as the economy recovered from near-zero growth last year. But after Mr. Zuma’s dramatic cancellation of the investment roadshow, the rand swiftly fell into a tailspin. It has lost 5 per cent of its value in the past two days, tumbling to about 13 to the U.S. dollar on Tuesday night.
Government bonds weakened, meaning that the government’s borrowing costs will increase. And some analysts predict that South Africa’s credit rating will fall into junk status if Mr. Zuma sacks his Finance Minister and deputy minister, as is now widely expected.
Critics said Mr. Zuma’s move against his finance officials was “economic sabotage.” David Maynier, an MP in the opposition Democratic Alliance, said the move was “calculated to humiliate the minister” and “could not have come at a worse time, as the minister battles to restore investor confidence in one of the financial capitals of the world.”
Mr. Gordhan arrived back in Johannesburg on Tuesday morning and was summoned to a meeting at the African National Congress headquarters. He later told reporters that he was still the Finance Minister, but he would not explain why Mr. Zuma had ordered the cancellation of his investor roadshow.
Mr. Zuma had reportedly authorized Mr. Gordhan and Mr. Jonas to lead the investment mission to London, before abruptly cancelling it after their arrival.Report Typo/Error