US rates, Pravin Gorhan, US dollar

Zuma wants Gordhan’s head, but where does that leave SA?

Way up sh** creek, that’s where.

US rates, Pravin Gorhan, US dollar

So the Rand took another tumble following reports of a plan to have finance minister Pravin Gordhan arrested and, according to economist Peter Attard Montalto; if Zuma really wanted to get rid of Gordhan, it would be hard, but not impossible.

Montalto, who’s an emerging markets economist at Nomura, said that the war between Zuma and Gordhan escalated over the weekend; with reports of Gordhan’s “imminent arrest” over allegations of his involvement in the so-called “rogue spy unit’ within SARS.

“We think the market is still grossly underestimating political risk premia and President Zuma’s present position and power – he is not a lame duck and may discount market turbulence,” said Montalto.

Last weekend the Sunday Times reported that Gordhan faces “imminent arrest” after the Hawks allegedly handed over a docket to the NPA. The report also named former finance minister Trevor Manuel and SARS commissioner Ivan Pillay.

Montalto added that the accusations against Gordhan would probably allude to covert operations at SARS in aid of former president Thabo Mbeki.

The presidency – true to form – rubbished the claims, saying it was the “work of dangerous information peddlers who wish to cause confusion and mayhem in the country”, and the NPA denied the existence of the docket.

“As far as the so-called rogue unit matter is concerned, which is [being] investigated by the Hawks, our prosecutors are actually guiding that investigation,” NPA spokesperson Luvuyo Mfaku told News24.

The Presidency also denied any imminent Cabinet reshuffle.

“However, it is assumed that any arrests should take place after the 3 August local elections so as not to disrupt ANC chances then,” Montalto said.

“The ongoing conflict between the tenderpreneur camp (with Zuma as its head) and the anti-tenderpreneur camp (with Pravin Gordhan as its notional head) has reached something of a stalemate on a number of issues.”

“On SAA, Pravin Gordhan will not extend new guarantees until the board is reshuffled and chairwoman Dudu Myeni is removed, but President Zuma will not permit her removal.”

“On Sars, Pravin Gordhan’s attempts to take greater control and restrict commissioner Tom Moyane’s restructuring of the entity have apparently been blocked by President Zuma.

“On the nuclear issue, the whole procurement process is still being blocked by the lack of sign-off from Pravin Gordhan and yet government rhetoric maintains that it will proceed,” said Montalto.

After Zuma fired Nhlanhla Nene last year, leading to the collapse of the Rand and hundreds of billions lost to the economy; the president had to reluctantly hire former finance minister Gordhan to try and fix what he deliberately f*cked up.

“Given this stalemate, President Zuma is going to have to take a major step forwards to achieve his goals. Pravin Gordhan’s strategy so far has been defensive and will have to remain so. For both sides the conflict is existential to different visions of South Africa. Pravin Gordhan has to successfully defend against every attack; President Zuma ultimately has to win only once.”

Montalto added that putting Gordhan on trial would achieve nothing and gave four reasons for this:

  • Proving that the so-called rogue spy unit was undertaking political activities would be nearly impossible.
  • Trying to prove that the unit was undertaking illegal covert activity seems to be a challenge given it appears to have been acting within relevant laws.
  • The existence of dossiers at SARS, originating from this unit, on Zuma, his family and associates would come up in any trial and be problematic for him and those around him.
  • If Zuma were indeed involved in the setting up of the unit and was a witness for the defence in any trial, it would further make such a trial untenable.

He did, however, add that a trial might not even be necessary.

“We believe there is a scenario that Pravin Gordhan and others merely have to be charged (after the local elections) in order for President Zuma to reshuffle the Cabinet and install a new finance minister (and deputy as well most likely).

“The charges could then hang in place for some time before being dropped and no trial would ever have to occur. In the interim, whoever takes on the finance minister role would have had time to provide whatever sign-offs and project approvals President Zuma may require,” Montalto said.