Why Zuma wants Gordhan to come back to South Africa: analysts
Research analyst at Nomura, Peter Attard Montalto, says that president Zuma’s move to cancel finance minister Pravin Gordhan’s investment roadshow in the USA and the UK was a ‘shock’ way to test the market’s reaction to a possible cabinet reshuffle.
While no official reason was given by the presidency for the recall, government sources told Reuters it was because Zuma did not ‘sign off’ on the trip, and that it was unauthorised. However, analysts say it is a more overt move from the president to test the waters for a cabinet reshuffle.
In a note to investors on Monday (27 March), shortly after the presidency confirmed reports that it had called for Gordhan to return to South Africa immediately, Attard Montalto said that Zuma has laid down “a clear red line” between him and Gordhan.
Issuing a direct order for the cancellation of a roadshow to see investors and ratings agencies, will hold key political risk for the week ahead.
“Either Gordhan obeys (the order) and Zuma is viewed as stronger, or Gordhan disobeys and challenges Zuma to fire him. If the roadshow continues then we will know what path is being taken,” Attard Montalto said.
“This is a dramatic shift in risks clearly given the baseline (held by Nomura) had been originally that a reshuffle would not see Gordhan touched. The chances of Gordhan-exit are now clearly higher,” he said.
However, the analyst noted that the finance minister is “used to playing such high stakes political poker games” – but in any case, the week ahead is going to be “really decisive”.
Testing the waters for a reshuffle
Attard Montalto said that there was a possibly that Zuma would only reshuffle deputy finance minister, Mcebisi Jonas, as stated in previous Nomura reports.
“I believe today could be a test of the water to undertake a reshuffle. The Presidency has seen such a strong ZAR and is wondering how much of a political shock it can take – they do watch these things closely. So far the market reaction has been very muted. Suggesting they could indeed go ahead with a reshuffle,” the analyst said.
“Let’s wait watch in coming days. As we’ve said previously, a reshuffle is ready to go and something Zuma wants to do. It could be deployed rapidly if Zuma does want to do it.”
The analyst said that investors should watch newly elected ANC MP Brian Molefe as a possible appointment into a deputy or possibly even a minister position. He said that former AU chair Nkosazana Dlamini Zuma will also likely be placed into the Presidency as a minister for transformation or similar.
“She can go there without becoming an MP if Zuma removes one of the other current two non-MP ministers,” he said.
Investec said in a brief noted: “The domestic currency’s sharp move today reflects fears that Minister Gordhan’s tenure may be in jeopardy again.”
David Maynier, DA shadow minister of finance said the president’s instruction to the finance minister is a major setback for the economy in South Africa.
“The instruction to cancel the international investor roadshow without explanation is so bizarre that it appears, at best, calculated to humiliate the minister or, at worst, to suggest that the minister is about to be fired in a cabinet reshuffle.
“Whatever the case the instruction to cancel the international investor roadshow could not have come at a worse time as the minister battles to restore investor confidence among international investors in one of the financial capitals of the world,” Maynier said.
Wayne McCurrie, fund manager at Ashburton Investments said that if the recall is just part of internal wrangling in ANC about ‘authorisation’ for the trip, then the finance minister could stay on, and go to USA.
“I am confident that finance minister got the correct authorisation beforehand as he is meticulous,” he said.
The rand continued to lose ground against major currencies shortly after 13h00:
Dollar/Rand – 1.75% weaker at R12.65
Pound/Rand – 2.55% weaker at R15.88
Euro/Rand – 2.26% weaker at R13.73
Read: Zuma orders Gordhan’s urgent return from international investment roadshow, sparking reshuffle fears
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