South Africa leader fires finance minister in late-night purge, sparking currency plunge

South Africa leader fires finance minister in late-night purge, sparking currency plunge
South African President Jacob Zuma addresses the country's parliament in February. (NIC BOTHMA / EPA)

In a late-night purge, South African President Jacob Zuma sacked the country's finance minister, Pravin Gordhan, and dismissed nine other ministers seen as disloyal to him, a move that roiled financial markets and saw the value of the currency plummet sharply.

Gordhan had been seen as a steady hand by the markets, admired for standing up to the president and fighting corruption and cronyism in Zuma's government. Analysts predicted South Africa's credit rating would be downgraded to junk in coming months.


Zuma announced the reshuffle at midnight in a blunt effort to reassert his strength amid bitter power struggles in his party over who will succeed him.

Zuma has been struggling for control of the treasury since 2015, when he sacked the previous finance minister, triggering a previous crisis for the rand. But he never got along with Gordhan. Replacing him with a loyalist, Malusi Gigaba, is seen as a grab for power over the country's finances.

In the reshuffle, Zuma clung to some of the least competent but loyal members of his government, including Bathabile Dlamini, who recently presided over a crisis that threatened the social welfare payments of millions of impoverished South Africans.

Zuma's purge further divided the governing African National Congress, with half the party's top six leaders strongly opposed to Gordhan's dismissal. Zuma, who had the power to act without them, reportedly based the dismissal on an intelligence report leaked to the media, which claimed Gordhan was acting in the interests of foreign banks and businessmen rather than South Africa.

Critics labeled the report a fake. The South African Communist Party, which also opposed Gordhan's sacking, announced that Zuma told party officials he based his decision on the report.

We view this as an open attack on Treasury to replace people who are conservative and anti-corruption with people loyal to Zuma.

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Gordhan told journalists he was sickened by the allegations in the intelligence report which he described as "absolute nonsense." He called on South Africans to "connect the dots" about what was going on in the country and to defend South Africa's interests.

"What should the public do? Organize! Organize!" he urged.

His former deputy Mcebisi Jonas warned that South African democracy was at risk and certain interests were getting ready to loot government finances.

As the rand spiraled downward Friday, party leaders condemned the move. The rand, which had been trading at R12.31 to the dollar Thursday before the reshuffle, fell to R13.61 early Friday.

Zuma's deputy, Cyril Ramaphosa said Gordhan's dismissal was unacceptable.

ANC Secretary-General Gwede Mantashe told South African media Friday that he was "very uncomfortable" with the reshuffle, because poor-performing ministers were not touched.

"Ministers have been moved and the majority of them were good performing ministers. I'm very much uncomfortable with it," Mantashe said.

Former South African president, Thabo Mbeki, said the reshuffle was "not normal" and warned of "very serious social instability" if Zuma failed to explain the reasons for the sackings.

The ANC is expected to take a sharp turn to the left after Zuma's statement that the reshuffle was designed to bring about "radical socio-economic transformation" and improve the lives of the poor. Already Zuma has foreshadowed land seizures from whites, raising fears that South Africa could follow Zimbabwe's path to economic ruin, which followed the seizures of white farms.


Zuma's move was also designed to shore up his position ahead of a leadership conference in December, when it's expected his successor will be chosen. Zuma is determined to protect himself from future prosecution by making sure that his ex-wife, Nkosazana Dlamini-Zuma, gets the leadership.

Gordhan's dismissal raised speculation that South Africa's credit rating could be downgraded to junk in the near future, with rating agencies due to make announcements in coming months.

London-based financial analyst Peter Attard Montalto predicted multiple downgrades by rating agencies as a result of Zuma's "attack" on the finance ministry.

"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 a full whack Zuma-led reshuffle which will lead to multiple imminent downgrades," he said, adding that the opposition to Zuma in the ANC now looked weak.

The purge followed a humiliating week for Zuma, with the president excluded from the funeral for revered ANC hero Ahmed Kathadra, one of Nelson Mandela's closest allies. A letter from Kathadra last year calling for Zuma to step down was read out at the funeral, to cheers.

Among the ministers to be sacked was Derek Hanekom, who held the tourism portfolio and is on the board of the Ahmed Kathadra Foundation. Hanekom, a Zuma critic, was part of a group of ANC figures who moved a vote of no confidence against Zuma at a meeting of the party's executive committee last November.

Hanekom tweeted that he learned about his sacking in a news release that gave no explanation. He said he was "deeply concerned" about what was happening in the government.

South Africa's opposition parties have announced a motion of no confidence against Zuma in the parliament, hoping that a big chunk of ANC members will vote against Zuma, leading to his downfall.

The purge appears to strengthen the hand of the Guptas, an Indian business family who are close to Zuma and Gigaba. Gordhan had openly criticized the Guptas' influence over Cabinet appointments and state contracts, and his deputy, Jonas, another casualty in the purge, last year accused the Gupta family of offering him a massive bribe.

The Banking Assn. of South Africa said Friday that the reshuffle was not in South Africa's best interests.

"The actions of the president have put our country into turmoil at a time that the country is trying to come together to address the problems we face," said association director Cas Coovadia. "The president's actions directly undermine the significant progress made in the last 18 months towards building confidence in our country."

Twitter: @RobynDixon_LAT




6:40 a.m.: This story was updated to include comments from the dismissed finance minister and other key South African officials, and also a prediction from analysts that South Africa's credit rating would be downgraded.

This article was originally published at 2:25 a.m.