South Africa playing a high-stakes game as president and treasury square off

South Africa’s political landscape is shifting almost by the hour. The gloves are off in a power struggle that pits the president, Jacob Zuma, against a group of reformers led by the finance minister, Pravin Gordhan. It is a high-stakes drama that has profound implications for the country’s beleaguered economy at a time when the international rating agencies are circling, smelling blood. In a potentially seminal moment in this unfolding soap opera, the deputy finance minister, Mcebisi Jonas, has issued an extraordinary public statement claiming that a business group close to the president offered him the job of finance minister late last year. At the heart of the political economy that now surrounds Zuma, and which Gordhan has set out his stall to confront, lies the infamous Gupta family – Indian expats with wide-ranging business interests spanning tech, mining, uranium and the media. Jonas’ statement said he was contacted by the Guptas and offered the finance ministry job before Zuma summarily dismissed Nhlanhla Nene, the respected incumbent, in December and replaced him with a rank non-entity ANC backbencher, David van Rooyen. The fall-out was so shocking that local reporters and commentators now refer to it as “9/12”. Jonas says he declined the offer out of hand because only the president has the constitutional authority to appoint cabinet ministers. Pro-democracy group the Council for the Advancement of the South African Constitution said his disclosure showed the extent to which the country is under threat from a patronage network that has grown ever more insidious since Zuma came to power in 2009. To understand the significance of the moment, it is necessary to take at least two steps back. Like Brazil and Russia, South Africa’s ANC-led government has struggled to offer convincing evidence that it has not run out of ideas in the fight against structural economic constraints which limit the prospects for the growth needed to reduce poverty and inequality. This growing gap between haves and have-nots threatens stability and adds to the sense of social precariousness and racial unease increasingly at play in Africa’s second-biggest economy. The international investment community and other market analysts have looked on as South Africa dug itself ever deeper into a rut, asking what it might take for the country to propel itself ahead of other emerging market economies. The answer came, ironically, from Zuma himself. Regarded as a large part of the problem because he has allowed himself to be captured by vested commercial interests, such as the Guptas, it was Zuma who dropped the bombshell on 9/12. The ripple effects will be felt for a long time to come. First, it woke up the “silent majority” within the ANC’s moderate middle and social democratic left. Asked on the evening of Nene’s dismissal what the ANC thought of the decision, ANC secretary-general Gwede Mantashe replied: “The ANC has no comment because the ANC was not consulted.” This was the first of a number of seminal, game-changing moments. Mantashe, a key powerbroker within the ruling party, and crucial to the organisational structures and power that will determine who succeeds Zuma, was furious. It was immediately apparent that Zuma had made an enormous political error of judgement. Never mind the reaction of the markets, which for the remaining two days of that tumultuous week battered the currency and South African bonds. Zuma had committed a cardinal sin. He had failed to consult the fellow leaders of his party, showing just how desperate he was to please his benefactors and serve his own interests. Nene had stood up to Zuma on a number of highly controversial issues, including restructuring and governance of the state-owned airline South African Airways and the procurement of nuclear power, where Zuma, his relatives and friends, such as the Guptas, have vested interests that need protection. As a result Nene was fired and replaced by a political weakling who would be beholden to Zuma and, apparently, the Guptas. On his first and – so it would turn out – only day in the National Treasury, Van Rooyen turned up with two advisers in the pay of the Gupta family. Within four days Zuma had been forced to replace Van Rooyen with Gordhan, who served as finance minister during Zuma’s first administration between 2009 and 2014. Senior ANC leaders, such as Mantashe and the increasingly influential treasurer-general, Zweli Mkhize, had made it clear to Zuma that what he had done was politically unacceptable. So Gordhan returned to the treasury with far stronger political backing than previously, and remains all but unsackable. Going into the new year the country was asking: who runs the government - the president or the finance minister? Within minutes of Zuma’s state of the nation address on February 11, the answer was clear. The treasury was back at the helm. Gordhan’s budget speech that followed shortly afterwards was a political masterpiece. He managed to do enough to suggest that South Africa would avoid a rating agency downgrade to junk status – at least until December. He also offered glimpses of the sort of innovation needed to propel a stubbornly sluggish economy towards growth. It was an act of political leadership. Gordhan made it clear that state-owned enterprises would be reformed and new rules brought in to prevent “predatory” attempts to capture state institutions for the purposes of self-enrichment. In response, Zuma resorted to type. He reignited an old investigation against Gordhan over a so-called “rogue” unit established by the South African tax service while he was commissioner more than a decade ago. Using loyal placemen at the revenue services and the Hawks, a specialist investigative unit within the police, Zuma has waged a proxy war against Gordhan for nearly a month. Gordhan seems to be up for the fight. He refused to answer the 27 questions that the Hawks sent to him until he was ready to do so, saying he could not be distracted from either his preparations for the budget nor a whirlwind roadshow in which he met investors, fund managers and market analysts in London, New York and Boston. Two days after his budget speech the Hawks leaked information about their investigation of Gordhan, clearly an attempt to undermine the finance minister who has emerged as the head of a reformist, progressive consortium within the government and the ANC that is opposed to Zuma.. In response to the leak, the ANC heavyweights responded with unusual speed. Mantashe provided a public statement of unequivocal support for Gordhan, indicating just how the balance of power is shifting away from Zuma. But in this high-stakes game of chicken, both sides have to step carefully along the tightrope that lies ahead of them towards the ANC’s national conference at the end of 2017 when the next ANC leader – and hence the country’s next president – will be chosen. Any misstep could lead to disaster. If Zuma refuses to give ground, Gordhan may have to resign or push harder, forcing the president into a corner where he may be forced to lash out and cause even more collateral damage. If Zuma pushes back too hard against Gordhan, or fires him, then the ANC heavyweights may have to lead a full revolt against Zuma that would lead to his “recall” – the fate that befell former president Thabo Mbeki in September 2008, when the ANC leadership ruled that he should resign after a court judgment suggesting he had interfered in a prosecution of Zuma himself. The charges against Zuma were suddenly dropped in March 2009, a month before he was elected president. This decision is currently before the courts, and if it goes against him it would be another wound in his side. With the ANC’s electoral domination likely to be challenged for the first time in important cities such as Johannesburg, Pretoria and Port Elizabeth in municipal elections in the middle of the year, it may be that the party will face the prospect of removing Zuma ahead of the end of his term – as ANC president in 2017 and South African president in 2019. Zuma will fight to the very end; that much is clear. Jonas’s act of principled leadership is a further milestone in a gripping political narrative and adds significantly to the case against the president. Thanks for reading.

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