Zuma’s ‘war’ for Treasury has just begun: analyst

President Jacob Zuma’s “war” against Pravin Gordhan is playing out exactly as predicted – with South Africa at risk of losing its finance minister to a carefully constructed narrative that will ultimately see Zuma and his allies fully capture the National Treasury.

This is according to research analyst at Nomura, Peter Attard Montalto, commenting on Tuesday’s announcement by the National Prosecuting Authority that it has summonsed Gordhan to court to face charges of fraud.

The charges brought by the NPA relate to alleged fraudulent behaviour in Gordhan signing off on an early retirement process at SARS. However, charges related to the so-called “rogue unit” are expected to follow.

In a note to investors, Attard Mantalto said that the charges against the finance minister are not entirely what they appear, and are in fact a small part in a much bigger plan, making up part of the “existential succession battle within the ANC that will continue until the end of 2017”.

According to Attard Mantalto, the end-game of the charges is not to see Gordhan behind bars, or even have the case go to trial (as there could be politically damaging evidence brought to light) – but rather to gain full control of National Treasury.

“The issue here is about access to the National Treasury and the ability of factions within the ANC to control it and use its powers to win the elective conference in December 2017,” he said.

“That ultimately would require the removal of Pravin Gordhan, who has defended the institution’s conservatism and independence.”

According to the analyst,the charges against Gordhan are all part of the narrative currently being built within the ANC about the need to remove him as finance minister – leveraging the ANC’s own rules that state leaders cannot hold office while facing charges.

While it is “impossible to forecast” a Cabinet reshuffle, Nomura now sees Gordhan being booted from the Treasury as a 50/50 prospect.

Worse still to come

One bit of key information to come out of the ordeal is that the NPA is undoubtedly aligned with Zuma, and has shown itself to be “risk loving” – an indication that it will likely move forward with more charges against Gordhan relating to the so-called “spy unit”.

Worse yet, there is apparently nothing – no degree of damage to the economy – that can stop it.

“Downgrade risk, markets as a constraining factor, the businesses community’s calls for calm – all are not stopping this from moving forwards; very much against the market view,” Nomura said.

The charges against Gordhan are only the first of many shocks expected to hit the South African economy through to 2017 – though much of the “emergency reaction” will likely be reserved for if and when Gordhan is officially given the chop, Nomura said.

According to the group, ratings agencies are unlikely to react – and a downgrade to junk won’t be signed off on structural reforms alone – while the mid-term budget reading at the end of October is likely to be unaffected, as much of the budget process has already been set.

“Ultimately, we see the political and policy uncertainty continuing through to end-2017 – holding back growth, job creation and especially domestic private sector investment, given (Zuma’s exit) seems highly unlikely and regardless of what occurs around National Treasury,” Nomura said.