The revelations made by the Public Protector on state capture this week have left president Jacob Zuma significantly compromised, done irreparable harm to the reputation of Eskom CEO Brian Molefe, and could see implicated ministers get the chop.
This is according to market analyst at Nomura, Peter Attard Montalto, who noted that the events that unfolded in releasing the report came as a big surprise to the markets, and to the parties who were challenging the president’s bid to block it from being published.
“The reason for withdrawal, in our view, was in part for Jacob Zuma to manage the narrative much quicker, i.e., nip the issue in the bud. But also we think mainly because the wider rent-seeking faction in the ANC has dictated that they want to move on now and strategies like trying to charge Pravin Gordhan haven’t worked,” Attard Montalto said.
Because of the events that have now unfolded, the chances of Zuma getting the chop before being replaced at the ANC elective conference in 2017 are significantly higher, he said – however, it does not necessarily mean the days of patronage and tenderpreneurship are at an end.
The analyst noted that the markets are likely to rally on any news that would point to Zuma being kicked out of the office.
Two alarming realities the state capture report revealed
While much of the Public Protector’s findings are nothing new – and have been played out in the media for much of 2016 – the state capture report did reveal two alarming realities in South Africa:
- The first is that state institutions are powerless to fight the abuses brought on by undue influence while it is happening, and can only do something after the fact – once a report like the state capture document has been published.
- The second is that the evidence shows that the ANC itself knows, and has known for a long time about the goings-on mentioned in the report, but has done absolutely nothing to stop it.
“This shows the extent of centralised power in the ANC which complicates the path from here for (Zuma’s early exit),” Nomura said.
According to Attard Montalto, there is a fracturing of support within the tenderpreneur faction of the ANC, which seems to suggest that Zuma’s power is “being increasingly checked by his own side”.
However, even if Zuma is given the chop, it does not mean that patronage and similar practices will be gone.
“People often underestimate how deeply patronage is built in to the ANC. We are likely to see major leadership changes sooner or later, but the situation itself may well remain unaltered,” Attard Montalto said.
“The political dynamic in the ANC is not clearly moving against tenderpreneurship and patronage, even after this report – it is simply trying to find ways of doing patronage more efficiently and quietly while ensuring electoral success through job creation.”
According to the analyst, what is likely to follow is months of drawn-out legal processes and internal reviews – which may stretch to a more opportune time, such as the ANC elective conference – while certain minister implicated in the report (Minister van Rooyen and Minister Zwane) may be reshuffled elsewhere.
Meanwhile, other leaders such as Eskom CEO Brian Molefe – once hailed by investors – will be left with a reputation in tatters.