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For those who were tortured by my somnolently incoherent post last night, here is the follow up. Hopefully a little clearer.

  • The flip-flops around the Minister of Finance leave Jacob Zuma looking weak and vulnerable. There are grounds to begin questioning whether he will see out his full term.
  • The appointment of Pravin Gordhan is a victory on a number of different fronts and should be celebrated.
  • We can expect the process of fiscal consolidation to continue on track.
  • It really is the season to be jolly.

Gordhan’s shock reappointment as Finance Minister – positive

Jacob Zuma fired the increasingly widely respected Minister of Finance, Nhlanhla Nene, on Wednesday December the 9th. He gave no reasons but there had already been wide speculation that:

  • Nene decisively blocked a nonsense SAA deal to lease some Airbus planes upon which Zuma associate SAA board chair Dudu Myeni had set her sights;
  • That Nene was pushing important investigations into corruption or mismanagement at SABC that were getting uncomfortably close to Zuma’s close personal friend Hlaudi Motsoeneng and
  • Most importantly Nene was blocking the (approximately) ZAR1-trillion nuclear deal that was the pet project of Jacob Zuma and his close business associates the Guptas – who had appeared to prepare for the deal by investing heavily through Oakbay investments in several uranium mines

Almost immediately the ZAR tanked, the bond yields spiked and everyone with a voice screamed blue murder at the irrationality of the axing.

Zuma then, perhaps more mysteriously, appointed the relatively unknown and unqualified David Van Rooyen to the post, despite there being many highly qualified candidates available (South Africa has made a point of putting its highest quality ministers into the National Treasury position.) The widespread assumption was that Nene was being replaced by someone who would be more compliant to the President’s wishes, and more importantly, to the wishes of those who are in business with the President.

Then …

Then, even more shockingly, late last night (13/12/2015) Jacob Zuma did an about turn, dropped Van Rooyen and reappointed Minister of Co-Operative Governance, Pravin Gordhan, as Finance Minister (a post he – Gordhan – held prior to Nene’s appointment 18 Months ago.)

Jacob Zuma has had his wings closely clipped – which is a good thing

The decision to axe Nene bordered on the criminal but most analysts thought that Zuma could get away with anything he wanted within the ANC – even as the ANC lost support amongst the electorate. Well it appears they were wrong. A powerful enough group of leaders have got together, sat Zuma down and forced him to make a humiliating climb down. The financial market response might have helped and the bleating of the opposition and the press would have given some support, but the ANC prides itself of being impervious to the shallow swings of public opinion (which is no bad thing). This was an internal leadership revolt against Zuma, the Holy Grail that many had been hoping for as the country went from the healthy constitutional democracy of 2007 to this damaged (in many of its most important institutions) country, almost overwhelmed by rent-seeking and corruption.

We out here in the public realm don’t know anything for sure, except Zuma was given a ‘warm klap’ (warm slap – colloquial Afrikaans) and we can hope that this might begin the unravelling of his negative influence on the country and its politics. The admonishment and humiliating climb-down must have been caused by ANC heavyweights who have finally found their voice and power enough to put Zuma in his place.

Pravin Gordhan will be a better Minister of Finance – even than he was before

Gordhan has all the credentials and had a close to faultless term as head of the National Treasury. (If memory serves, like all heads of the NT his slips concerned the public wage sector bill and desperate attempts to avoid public sector strikes.) His only weak point is he tends to run an unhappy office … it was widely speculated that the staff at the National Treasury were unhappy with his dictatorial style of leadership. This we can live with.

Of interest is that since Gordhan had left the Treasury a witch hunt has been conducted in Gordhan’s previous posting, the South African Revenue Service, SARS. The witch hunt has been against an alleged “rogue spy unit”. The fact is the special investigation units, established by Trevor Manuel and Pravin Gordhan were an essential part of investigating complicated tax avoidance and fraud cases, especially those involving heads of large criminal networks and powerful politicians. It is a small step to see who might have been the obvious targets of the special investigative units. And an even smaller step to see why and who has stimulated the witch hunts and slander against the loyal SARS investigators involved in these units – calling them rogues and criminals, and ensuring their dismissal or buyout.

Thus this is going to be a Finance Minister that nobody is going to push around – especially not Jacob Zuma and his cronies – against whom Gordhan has good reason to feel ill-disposed. It’s a win-win.

My only faint worry is I am not sure of Gordhan’s attitude to the nuclear programme. I am sure he will not do anything to threaten the process of fiscal consolidation, but as an old style ANC securocrat he might have an over-attachment to nuclear power (an affliction of those who grew up in the ANC in the 70’s mostly because of the USSR’s warm embrace of that technology).

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I am an independent political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

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