All eyes are on President Zuma's and Finance Minister Gordhan's next move. Zuma is the master of playing the ANC so where will he go next?
The market received a sharp wakeup call last month with news that Finance Minister Pravin Gordhan had been summoned to receive draft charges around the issue of the so-called spy unit at SARS when he was Commissioner. This was a rude awakening for a market with zero political risk premia. The ‘war’ suddenly was alive again.
Before the local elections campaign got under way, there was a rough stalemate in the ‘war’ between Pravin Gordhan and President Jacob Zuma. It was then buried for the election campaign as the focus shifted by both sides to maximising the ANC’s chances in the polls. However the ‘war’ was not over and it did not disappear. The market wrongly priced our political risk premia from May to the start of August to zero, especially after the elections. In particular, the market does not understand the political dynamic within the ANC, and especially relating to Zuma’s position and his power.
In particular, Zuma has not lost power – neither after Nene-gate nor after his constitutional court case on Nklandla nor after these local elections. Zuma is the master of playing the ANC, and especially the NEC at its own games, holding it in equilibrium exactly where he wants it. We still believe he has the support of at least 60% of the NEC, which, in turn, backs him in what is going on now.
We believe that Pravin Gordhan will fight for as long as possible to remain in position and to protect the law, NT, and its staff. This has been shown by his decision that he will not attend the meeting summons with the Hawks. He is protesting his innocence in the strongest possible terms but also putting the ball firmly in Zuma’s court to fire him.
Ultimately, there is a need for speed here from Zuma’s perspective and that is why we think this will move rapidly, to an arrest and charges and then ultimately on to a reshuffle.
Read more on Zuma’s options and four possible candidates for Finance Minister and watch Peter's thoughts on ZAR.Read more