President Jacob Zuma’s decision to axe both the finance minister and his deputy in his latest cabinet reshuffle is an open attack on Treasury, and a power play by the president to show his opponents that he can do as he pleases, says Nomura research analyst, Peter Attard Montalto.
In a midnight note to investors, reacting to the reshuffle, Attard Montalto said that Zuma’s move was ‘market negative’, and was close to the worst-case scenario outlined in previous updates around a possible move on National Treasury.
According to the analyst, the reshuffle shows that Zuma feels confident in his support base within the ANC NEC, and that he views the risk of upset within the party (particularly to the point it would split on his decision) as low enough to effectively do as he pleases.
“The reshuffle is designed to lubricate the way to the elective conference through National Treasury and a variety of major other ministries,” he said.
“We view this as an open attack on Treasury to replace people, who are conservative and anti-corruption, with people loyal to Zuma to help the Zuma faction win in December.
“This is an attack… and will trigger multiple downgrades. As we’ve highlighted before while there are some fiscal risks, we are more worried about Treasury’s role in procurement, preventing corruption, and oversight of SOEs – including nuclear and banking.
“This is bad for the market and for SA,” Attard Montalto said.
List of unknowns
Of concern is the fact that the list of new ministers is a list of “largely unknowns”, the analyst said.
“The market will struggle to digest (new finance minister Malusi) Gigaba. Someone who has been effective at home affairs but is clearly being put in a role to do a particular job by Zuma and viewed as loyal to Zuma. Similarly with (new deputy finance minister) Buthalezi.”
Notably, and more importantly mining minister, Mosebenzi Zwane remains in his portfolio, who the ANC top 6 had asked to be removed, given his closeness to Zuma.
Other ministers also not removed, who were seen as under-performing Zuma loyalists, are Social Development Minister Bathabile Dlamini and Communications Minister Faith Muthabi, who moved portfolios but stayed in cabinet.
“Zuma is taking a risk here, and the next step is to watch what happens with resignations. A key risk of resignations now comes from SACP members – and it was a surprise that more of them haven’t been removed,” Attard Montalto said.
“It is also odd that Nkosazana Dlamini-Zuma hasn’t entered at this stage…. maybe (president Zuma) is waiting for deputy president Cyril Ramaphosa to resign and then put her there? This is the next step we watch for. This is not over yet.”