Zuma Exposed as Gloves Come Off in S. African Power Struggle

  • Gordhan implicates Zuma allies in suspect transactions
  • Ramaphosa, senior officials rally behind finance minister

South African President Jacob Zuma appears increasingly vulnerable in a power struggle with his finance chief after a series of new allegations emerged about the business dealings of members of a wealthy family who are his friends and in business with his son.  

Finance Minister Pravin Gordhan is receiving growing support from senior government officials as he faces fraud charges. On Friday, he went on the offensive by disclosing in an affidavit to the High Court that members of the Gupta family and companies they control have been implicated in “suspicious transactions” worth 6.8 billion rand ($475 million) over the past four years.

The revelations upped the ante in a struggle for control of the National Treasury that’s raged since Zuma, 74, named Gordhan finance minister in December under pressure from business and ruling party leaders after his decision to give the post to little-known lawmaker David van Rooyen sparked a sell-off in the rand and nation’s bonds. 

“There is an all-out fight,” Roland Henwood, a politics lecturer at the University of Pretoria, said by phone. “It’s a political fight that involves the use of institutions such as the National Prosecuting Authority; it involves using the judiciary. And let’s be clear, the one weakness of the Zuma administration has been the judiciary.”

Zuma and the Guptas are already the subject of an investigation by the nation’s public protector over whether the family wielded undue influence over the government -- what is known in South Africa as “state capture.” Deputy Finance Minister Mcebisi Jonas said in March the Guptas offered him the ministerial post in exchange for business concessions. Both the Guptas, who plan to sell their South African assets, and Zuma deny any wrongdoing. The president is seeking a court order preventing the publication of the graft ombudsman’s findings.

Money Laundering

Gordhan filed the affidavit to obtain a court ruling that he can’t intervene in a decision by the country’s largest banks to close accounts of Gupta companies, as family representatives repeatedly asked him to do, because he doesn’t have the legal authority and the lenders’ decisions appear warranted.

A document from Murray Michell, the director of the Financial Intelligence Center, that was annexed to Gordhan’s court application, listed 72 suspicious transaction reports implicating members of the Gupta family and their companies, some of which comprised multiple entries for which no amount was listed. He didn’t specify why the transactions were considered suspect.

“Those transactions are all proper transactions,” Gert van der Merwe, a lawyer for the Gupta family, said Monday in an interview on Johannesburg-based Power FM.

Zuma’s spokesman Bongani Ngqulunga didn’t answer calls to his mobile phone.

Speculation that Zuma wanted to fire Gordhan and appoint a more pliant Treasury head was fueled by an Oct. 11 announcement by prosecutors that they plan to charge the minister with fraud over his approval of a tax agency official’s early retirement and subsequent reappointment on a contract basis. The agency’s lawyers approved the decision more than 18 months after it had been vetted by Gordhan in 2009, Johannesburg’s City Press newspaper reported Sunday, citing a letter sent to the National Prosecuting Authority.

Credit Rating

Gordhan, 67, who’s been a key driver of a campaign to maintain South Africa’s investment-grade credit rating, which is up for review in December, has said the charges against him are frivolous and politically motivated and he’ll only vacate his post if Zuma fires him. On Sunday, Deputy President Cyril Ramaphosa, a leading contender to succeed Zuma, said the finance minister had his moral and political support and that legal processes shouldn’t be abused.

To read more about why the power struggle is roiling markets, click here

Gordhan has also drawn backing from civil rights and business groups, former finance minister Trevor Manuel, and labor unions and communists who are allies of the ruling African National Congress. At least eight government ministers plan to express their dissatisfaction with the way the case against Gordhan has been handled when the Cabinet meets on Oct. 19, Johannesburg’s Sunday Times newspaper reported.

Democratic Transformation

“South Africa’s democratic transformation cannot afford to have a man of Gordhan’s abilities distracted or sidelined,” business leaders, including former Standard Bank Group Ltd. Chief Executive Officer Jacko Maree and Brait SE ex-CEO Antony Ball, said in an advertisement published Monday in Business Day newspaper. “We know him as a man of immense integrity, leadership ability and commitment.”

Zuma’s second and final term as president ends in 2019. Pressure for him to quit or be fired has been mounting since the nation’s highest court ruled in May that he violated the constitution when he refused to repay taxpayer money spent on upgrading his private home.

Discontent with his rule contributed to the ANC’s worst-ever electoral performance in a municipal vote in August that saw it lose control of three major cities, including the capital, Pretoria, and Johannesburg, the economic hub. The ANC’s decision-making national executive committee, which is stacked with Zuma allies, has helped shield him from censure.

Gordhan’s affidavit adds weight to the argument that Zuma has abused his position to further his economic interests and those of his family and allies. 

“It strengthens Gordhan’s hand because it forces the law enforcement authorities to act,” Mzukisi Qobo, an associate professor at the University of Johannesburg, said by phone. “What all of this does is to put the matters in the knowledge of the public, making it harder for other agencies and people not to discuss it.”

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