The chances of president Jacob Zuma reshuffling his cabinet in the coming months is fairly likely, analysts say – but questions are floating around whether or not finance minister Pravin Gordhan is a target.
According to research analyst firm Nomura, in its forecast report for 2014, while it cannot be said that a cabinet reshuffle is a “certain”, it remains a likely move for Zuma, as he would need to consolidate power ahead of the ANC’s consultative, policy and elective conferences to be held in 2017.
“We think a reshuffle and consolidation of power around (Zuma) is still possible in the coming month or so. We recognise that such a reshuffle has basically been hanging over us for two years now, but the immediacy of the coming elective conference does change the political calculus somewhat.”
“It will remain a likely – but not ‘for certain’ – in the near future, in our view,” the group said.
While Nomura believes that compromises and commitments made at NEC meetings in late 2016 makes a ‘Gordhan exit’ unlikely, it conceded that there is a meaningful (if difficult to pin down) likelihood of a wider reshuffle that could shock the market.
Gordhan a target?
Recent speculation from opposition parties is that, should a reshuffle occur, finance minister Pravin Gordhan would be a likely target.
Speaking to Fin24, DA deputy finance chief Alf Lees speculated that removing finance minister Pravin Gordhan could be the end-game of ongoing tensions between the minister and SARS head, Tom Moyane – most recently captured by remarks from Gordhan, where he said that he can no longer rely on information from SARS.
According to Lees, this continued breakdown in the relationship between SARS and National Treasury would in effect make it incredibly difficult for Gordhan to do his job as finance minister, which in turn could fuel the narrative that he needs to be removed and replaced.
This would not be the first time Gordhan’s position has been frustrated in this manner.
In 2016, Gordhan managed to come out on top in several instances where his position as finance minster could have been tainted. This includes a much-publicised battle with the Hawks, where the latter tried to pin him down on fraud charges.
Many analysts, including Nomura, saw the weak fraud case against Gordhan as an attempt to get him removed from National Treasury under the ANC’s policy of not having members in Cabinet positions when they have criminal charges against them.
Ultimately the charges were dropped – but the sour relationship between Gordhan and Moyane (who is said to have initiated the investigations related to the charges) had been blown wide open.
What if Gordhan goes?
Nomura has warned that any scenario where Gordhan is removed from his position in National Treasury will be extremely negative for the economy.
Because of his role in stabilising the South African economy post NeneGate in 2016, his removal would likely cause ratings agencies to react with an immediate rating downgrade to junk status.
Other effects of a Gordhan removal would be uncertainty around spending in certain state-owned companies (such as Eskom and SAA), which already bite off far more than is sustainable out of the budget.
All this, in turn, would likely send the rand crashing, which comes with all the usual negative effects – such as higher fuel and consumer prices.