South Africa’s Gordhan, junk rating, deficit hang in the balance

 

 

With South Africa’s ruling African National Congress (ANC) party executives opting over the weekend to not yet ‘recall’ embattled President Jacob Zuma from the presidency, but rather demand a broad agenda of aggressive fiscal policy interventions to combat rising unemployment and social despondency – South Africa’s indefatigable finance minister Pravin Gordhan’s job is now naturally on the line. Gordhan has in recent weeks and months promised both international credit rating agencies and jittery investors that he will hold a strict line against the budget deficit and reverse it from the current level of just under 4% to 2.4%. These targets are now no longer feasible and a ratings downgrade to junk is now all but inevitable. Gordhan’s promises will now have to be broken to satisfy the party, and Gordhan is not likely to stick around to see them jettisoned. The ANC in opting to sacrifice macroeconomic stability for Zuma may also signal that it will attempt to make peace with the radical Economic Freedom Fighters (EFF) party and only after failing to reach agreement will it turn to the centrist Democratic Alliance (DA).

While the top leadership of South Africa’s governing African National Congress (ANC) party: Deputy President Cyril, Ramaphosa, Speaker of Parliament Baleka Mbete, General Secretary Gwede Mantashe, Deputy General Secretary Jessie Duarte and Treasurer Zweli Mkhize are said to privately believe that President Jacob Zuma must step down from the country’s highest office, they are outnumbered by a strong majority of South African cabinet ministers and party National Executive Committee officers, made up of many former Umkhonto we Sizwe (MK) ex-security apparatchiks and veterans (‘Siloviki’) who remain firmly opposed to Zuma’s ouster.

Zuma upon taking office purged most of the senior officials he inherited from President Thabo Mbeki who did not belong to the MK-faction within the party leadership. Only 10 cabinet ministers who served under President Mbeki have also served under Zuma. Of those Mbeki-era ministers who were invited to join Zuma’s government, 70% are former MK veterans. Of Zuma’s 60 cabinet appointments since 2007 many have hailed from an MK-security background.

President Jacob Zuma, like all other post-Apartheid ANC leaders before him, has since winning power in 2007 dramatically revamped both the membership of the ANC’s top party organ as well as the South African cabinet with party official who share with him a similar worldview. The predominance of Umkhonto we Sizwe veterans around Zuma reflects his security/intelligence ‘Siloviki’ mindset. Zuma, a dyed-in-the wool Umkhonto we Sizwe (MK) former security/intelligence/counter-intelligence apparatchik has since the 2007 Polokwane party conference removed and replaced key party and state officials who do not hail from the MK-Siloviki background and replaced them with loyal comrades who do. Zuma’s actions have virtually insulated him from being forcibly removed from office despite the widespread unhappiness within the party over his leadership.

Despite the recent collapse of Zuma’s political capital, and attempts by other sidelined groups within the ANC political confederation to oust him form power, (even when ultimately successful), Zuma’s MK-Siloviki clique will continue to control major levers of power within the ANC and South African state until the next party conference in late 2016, with consequential implications for Deputy President Cyril Ramaphosa, (who hails from a non-MK background), when Zuma finally steps down.

 

 

By: Sebastian Spio-Garbrah

Chief Africa Frontier Markets Analyst & Global Managing Director of DaMina Advisors