ANC Risks Internal War as S. African Finance Minister Probed

QuickTake: South Africans Lose Faith in ANC
  • President Zuma’s succession is key issue of dispute: Jolobe
  • Concern over Gordhan’s fate pushing down rand, bonds

Splits in South Africa’s ruling party over a police investigation of the finance minister are marking the battle lines for control of the African National Congress after President Jacob Zuma steps down as its leader next year.

The tension within the party has intensified following a chorus of criticism by business and political leaders and a market backlash over reports that Finance Minister Pravin Gordhan is being investigated by a special police unit known as the Hawks, as well as the ANC’s worst-ever electoral performance in local elections this month. Overshadowing it all is Zuma’s scheduled departure as the ANC’s leader and as the nation’s president in 2019.

“The probe itself is not the issue; the investigation is simply a symptom of ongoing tensions around succession,” Zwelethu Jolobe, a senior lecturer at Department of Political Studies at the University of Cape Town, said Monday by phone. “They have to do a lot with the fact that these are the last terminal days of the Zuma era.”

Political Stability

Concern that Gordhan will be charged or fired weakened the rand and the value of the nation’s sovereign debt, as investors weigh up the risks to political stability under the rule of the ANC, which has led South Africa since Nelson Mandela swept it to power after the end of apartheid in 1994. While Zuma has expressed “full confidence” in Gordhan, he said he doesn’t have the legal authority to end the probe.

“The risks of the ANC splitting because of factions trying to annihilate each other is quite real,” said Somadoda Fikeni, a politics professor at the University of South Africa.

At a funeral eulogy for a former ANC leader last week, Deputy President Cyril Ramaphosa, a leading candidate to succeed Zuma as party leader, said he lamented the arrest threat hanging over Gordhan, to whom he pledged “my total confidence.” Other candidates include the president’s former wife and outgoing head of the African Union, Nkosazana Dlamini-Zuma, and party Treasurer General Zweli Mkhize.

“It should concern us because when a government works well it should be a government that does not wage war with itself,” he said.

The political turmoil also puts the nation’s investment-grade credit status at risk. Fitch Ratings Ltd. and S&P Global Ratings affirmed South Africa’s long-term foreign currency rating at BBB-, the lowest investment grade, in June and said the government must take decisive measures to bolster growth, quell policy uncertainty and end instability to avoid a downgrade.

Business Perplexed

“It’s quite clear that the ruling party is having a fight within itself and those fights are unfortunately hurting confidence in the economy,” Mike Schussler, chief economist at Economists.co.za in Johannesburg, said by phone. “Businesses are really perplexed as to what is going on.”

Opposition parties and analysts have said Zuma and his supporters may use the investigation of Gordhan to install a more compliant finance minister.

The president and his finance minister have been in conflict even since Zuma, 74, was pressured into appointing Gordhan, 67, to his post in December after his decision to replace the respected Nhlanhla Nene as finance minister with a little-known lawmaker sparked a sell-off in the rand and nation’s bonds with the currency having declined about 6.4 percent against the dollar since the demand Gordhan report for questioning became public. The rand lost 0.2 percent to 14.4345 against the U.S. currency at 7:35 a.m. in Johannesburg Tuesday.

Gordhan’s Pleas

Zuma has rejected Gordhan’s pleas to fire the nation’s tax chief for insubordination and to replace the board of the loss-making state airline. Last week, the cabinet said Zuma would be the chairman of a new committee to oversee state-owned companies, a move that appeared to take some responsibility away from Gordhan.

ANC officials including Matthew Phosa, the ANC’s economic policy head, Enoch Godongwana, and former finance minister Trevor Manuel have backed Gordhan, who refused to appear for questioning at the offices of the special police unit known as the Hawks over allegations that he set up an illicit investigative unit when he ran the national revenue service. Other ANC officials, including party Deputy Secretary-General Jessie Duarte, say Gordhan put himself above the law by failing to present himself to the Hawks. Gordhan said he wasn’t legally obliged to do so.

“The fact is that the spirit of Mandela within the ANC, the high morality within the ANC may well carry the day for the modernizers and the reformers in the ANC,” Colin Coleman, partner and head of Goldman in South Africa, said in an interview with Bloomberg TV on Monday. “But it may be that those traditionalists who are bent more on capturing state resources for a small elite in the power structures of the ANC may prevail.”

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