President Jacob Zuma has overhauled his cabinet, axing a highly-respected finance minister and several others who were seen as rivals. The currency has plummeted and his decision has led to renewed calls for him to step down.

Demonstrators have taken to the streets to protest the cabinet reshuffle. Many feel that it will hurt the economy.
Demonstrators have taken to the streets to protest the cabinet reshuffle. Many feel that it will hurt the economy.

Where's this coming from?

The decision to axe the this minister has been in the pipeline for weeks.

When Zuma recalled Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas from an investor roadshow in the UK this week, the rumour mill went into overdrive.

Senior officials from the ruling party, the African National Congress (ANC), had just met with Zuma to persuade him not to fire Gordhan. The veteran anti-apartheid activist had served as finance minister three times.

Zuma and Gordhan were at loggerheads for a year over the National Treasury's efforts to root out cronyism in state owned companies.

Gordhan has also challenged the growing influence of the Guptas, powerful and wealthy Indian immigrants who are close to Zuma and who use this link to seek lucrative government contracts. It was also suggested that the family meddled in government appointments and policy.

Gordhan is internationally respected and was re-appointed two years ago after Zuma fired former finance minister Nhlanhla Nene. Little known Des van Rooyen, who had no financial experience, replaced him.

The markets tumbled as a result, and van Rooyen's appointment – that only lasted a weekend – cost South Africa 169 billion rand.

Firing a finance minister hurts the economy. But why make the same mistake twice?

Zuma's decision to replace Gordhan and his deputy with Home Affairs Minister Malusi Gigaba and Sfiso Buthelezi might give him greater control over the National Treasury. The office administers the government's finances and approves state contracts.

Gigaba comes from Zuma's home province, KwaZulu-Natal, and is a political ally. He has served in the cabinet before as Public Enterprises and Home Affairs ministers – but he lacks financial experience.

"This is primarily about taking on the Treasury, particularly Minister Gordhan and Deputy Minister Jonas," BNP Paribas political analyst Nic Borain said.

It's also about "the placement of loyalist, Gupta allies, Malusi Gigaba and Sifiso Buthelezi, both significantly market-negative candidates".

The effects of Nene's dismissal are still fresh in the minds of many South Africans. In 2015, South Africa lost 500 bln rand. State pension investments were hit hard, losing 100 bln rand.

When markets opened on Friday, shares in the banking sector, which is the most advanced on the African continent, declined five percent and bond yields made sharp advances.

The currency, the rand, fell five percent – and is set for its biggest weekly drop since 2015, when Zuma fired Nene.

Gordhan has been seen as highly competent, having reigned-in spending, tackled corruption, and reduced the budget deficit.
Gordhan has been seen as highly competent, having reigned-in spending, tackled corruption, and reduced the budget deficit.

So what? Presidents reshuffle their cabinets all the time.

Investors have come to trust Gordhan. He is seen as highly competent, having reigned-in spending, tackled corruption, and reduced the budget deficit.

The appointment of an inexperienced replacement could rattle investors.

Gordhan has managed to prevent a downgrade, but the cabinet decision will leave South Africa's credit rating vulnerable.

Moody's Investor Service, which rates South Africa's debt at two levels above junk, and with a negative outlook, will publish a review of Pretoria's creditworthiness in April. S&P; Global Ratings and Fitch have kept their assessments at the lowest grade since last year.

"We expect the current explosion of political turmoil and its resulting economic and fiscal uncertainties to catalyse sovereign rating downgrades," Phoenix Kalen, Societe General SA director of emerging market strategy, told Bloomberg.

What does this mean for South Africa?

It's likely to deepen political and economic instability.

The night of long knives is a high stakes power-play for Zuma's own political future and Africa's strongest economy.

Zuma closest ally, ANC Secretary General Gwede Mantashe, who helped propel him into power as the party's leader in 2007, and later into presidency in 2009, has openly criticised him.

"I am very uncomfortable because areas where ministers do not perform have not been touched. Ministers who have been moved, the majority of them are performing ministers," Mantashe told Talk Radio 702.

"I feel like this list has been developed somewhere else and was given to us to legitimise it. I cannot say ‘consulted'."

South Africa's media reported this week that five of the highest ranking officials convinced Zuma not to fire Gordhan and Nene when they were recalled from the UK.

Another former supporter who was instrumental in Zuma's rise to power, union leader Zwelinzima Vavi, wants South Africans to march to the Treasury to object the reshuffle.

What's the political fallout?

The opposition has renewed calls for Zuma to step down.

The leader of an ANC radical breakaway group, Economic Freedom Fighters, Julius Malema once said he would "kill" for Zuma. But now, he wants him out of office.

The EFF on Thursday petitioned South Africa's highest court to impeach Zuma. On Friday, they called for parliament to hold a vote of no confidence. Similar votes have failed because the ANC has an almost two-thirds majority. But Malema said the country was facing a crisis and that it does not hurt to try.

South Africa's main opposition, the Democratic Alliance, also said that Zuma was not fit for office and should be forced out.

An official statement from the ANC on Friday called on members to stand behind Zuma's decision, but the midnight reshuffle is threatening to fracture the 105-year-old party.

The party that liberated South Africa after decades of white minority oppression is deeply divided over Zuma and facing one of its biggest crises yet.

"Longer-term, the ANC will have a hard time recovering from this period of intense instability," the political risk firm Eurasia Group said in a note.

Why does Zuma still have the top job?

Removing Zuma from office is not that easy, but the ANC has done it before.

In 2007, President Thabo Mbeki was recalled about nine months before his term was up.

Zuma's credentials from the anti-apartheid era were once strong; he was a former ANC intelligence operative and political prisoner who was jailed with Nelson Mandela.

But trust in the president is now waning.

In November, he survived a vote of no confidence from his own party, but his popularity seems even lower now.

Deputy President Cyril Ramaphosa said firing Gordhan was "unacceptable."

"I raised my concern and objection on the removal of the Minister of Finance‚ largely because he was being removed based on an intelligence report that I believe had unsubstantiated allegations about the Minister of Finance and his deputy going to London to mobilise financial markets against our country."

Only the ANC's highest decision making body, the National Executive Committee which is made up of 104 of its highest ranking members, can force Zuma out of office.

Source: TRTWorld and agencies