Finance Minister Debacle Buoys ANC Reformers in South Africa

  • The ruling ANC could feel impact at local elections next year
  • The party still enjoys strong support in rural areas

South Africa’s embarrassment over having three finance ministers in a week not only roiled the markets; it shifted the balance in a power struggle in the ruling African National Congress.

Top ANC officials are worried that political patronage is tarnishing the party once led by Nelson Mandela and eroding its public support, pitting them against provincial leaders who want looser control of the Treasury.

Zuma looks on while van Rooyen is sworn into office, Dec. 10.

Photographer: Waldo Swiegers/Bloomberg

Jacob Zuma’s decision to replace Finance Minister Nhlanhla Nene with a former small-town mayor with little political clout, only to oust him four days later following lobbying by business leaders and ANC officials, weakened the president and his mainly rural support base, according to analysts. In the wake of a 10 percent drop in the rand against the dollar, bond yields at a seven-year high and a plunge in banking stocks, Zuma returned Pravin Gordhan to the post of finance minister.

He announced the reversal after Deputy President Cyril Ramaphosa, ANC Secretary-General Gwede Mantashe and three other senior party leaders said the situation wasn’t tenable in a 70-minute meeting with Zuma, according to the ANC’s deputy secretary-general, Jessie Duarte. The president’s staunchest support comes from a group of governors and party leaders in four rural provinces known within the ANC and the media as the Premier League.

Party Values

“Some in the ANC are moved by a fear that the values of the party are being eroded and want to see change,” Somadoda Fikeni, a political analyst at the University of South Africa in Pretoria, the capital, said by phone Thursday. “This is the best opportunity during this time of crisis.”

Pravin Gordhan

Photographer: Waldo Swiegers/Bloomberg

Within hours of his appointment, Gordhan, who served as finance minister for five years from 2009, publicly addressed the issue of patronage head on.

It’s time that individuals stop playing with government companies and institutions “as if it’s their personal toy and extract money when they feel like,” he said.

In a rare indication of discord within the ANC’s National Working Committee of top party officials, there was “quite a robust engagement” where “hard questions were asked” at a meeting on Monday, said Zuma’s former foreign policy adviser, Lindiwe Zulu.

Former central bank governor Tito Mboweni said Zuma handled Nene’s removal “very badly.” Speaking in an interview with Bloomberg TV on Dec. 14 said, “It will take a bit of time before we can claw back all that we’ve lost as a result of the poor decisions of the past couple of days.”

Meddling by officials and power struggles at state-run companies like South African Airways have cost the government billions of rands in losses, while power cuts by utility Eskom Holdings SOC Ltd. almost daily in the first half of the year highlighted for critics the government’s mismanagement.

‘Patronage Networks’

“Money is going into the patronage networks rather than going into the country and the economy,” said Ralph Mathekga, a Johannesburg-based political consultant. “Corruption and patronage have become an industry in South Africa, where people have even gained control over these entities.”

Local elections scheduled to be held between May and August will show if the ANC will pay a price for increasing concern by voters about the government’s performance. The party has governed with more than a 60 percent majority since it came to power at the end of apartheid in 1994. Its share of the vote fell by nearly four percentage points to 62 percent at the end of Zuma’s first term as president last year.

Whether the ANC reformers are gaining strength will be tested in the coming weeks with the unfolding of the process for building new nuclear power plants. Nene, who argued that the plants need to be affordable, was dismissed the day cabinet gave the go-ahead for the procurement to start.

Another sign will be the fate of a plan by SAA Chairwoman Dudu Myeni to change a plane-leasing deal with Airbus Group SE. Nene rejected her proposal and Gordhan said on Dec. 14 that the former minister’s decision stands.

Ramaphosa’s Support

In the longer term, the election of a new party leader to succeed Zuma, 73, in 2017 will determine whether the reformers have won the day.

Cyril Ramaphosa

Photographer: Rajesh Jantilal/AFP via Getty Images

Ramaphosa, 63, has drawn support from the reformers who are concentrated in the urban areas, especially Johannesburg, South Africa’s commercial hub, Steven Friedman, director of the Center for the Study of Democracy, wrote in Business Day newspaper. The Congress of South African Trade Unions, the biggest labor group, now supports him as the successor.

The other front-runner, who is backed more by Zuma’s current support base, is his ex-wife and current chairwoman of the African Union Commission Nkosazana Dlamini-Zuma, 66.

“If the ANC doesn’t show itself to be more professional in how it runs the country, more support will slip away,” Adam Habib, the vice-chancellor of Johannesburg’s University of the Witwatersrand, said in an interview. “It’s always been the party of the black middle classes and those guys are kind of freaked out by this.”

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