South African President Jacob Zuma ordered Finance Minister Pravin Gordhan to abort a week-long roadshow meeting with investors and rating companies in London and the U.S., heightening concern that he’s preparing to change his cabinet.
The rand plunged after Zuma told Gordhan and his deputy, Mcebisi Jonas, to cancel the roadshow and return to South Africa. Presidential spokesman Bongani Ngqulunga announced the decision in a statement on Monday without giving a reason.
Gordhan will comply with the order, according to a person familiar with the situation who asked not be identified because a public statement hasn’t been made.
Speculation that Gordhan is on the verge of being fired has swirled for months, as he clashed with Zuma over the management of state companies and the national tax agency. While Gordhan has led efforts to keep spending in check and fend off a junk credit rating, Zuma wants to embark on “radical economic transformation” to tackle racial inequality and widespread poverty.
‘Live-Wire Situation’
“Whether this is a reshuffle or not, the timing is definitely picked to inflict pain and embarrassment on an already live-wire situation,” said George Herman, chief investment officer at Citadel Investment Services in Cape Town. “There is no other practical reasoning for the timing of this.”
Moody’s Investors Service, which rates South Africa’s debt at two levels above junk and with a negative outlook, is scheduled to publish a review of the nation’s creditworthiness on April 7. S&P Global Ratings and Fitch Ratings Ltd. kept their assessments at the lowest investment grade late last year.
The rand weakened as much as 1.9 percent against the dollar and was 1.6 percent weaker at 12.6299 at 2:23 p.m. in Johannesburg. The government’s rand-denominated bonds due 2026 fell, driving the yield 22 basis points higher to 8.59 percent, the biggest jump since October.
If Gordhan or Jonas are fired, “the selloff will be vigorous,” said Jonathan Hertz, chief executive officer of Peregrine Holdings Ltd., which has 116 billion rand in assets under management. “There will be a shudder in the market. I see a big pullback. I think you could see 14, I don’t think you will see 15.”
Zuma, who is due to step down as head of the ruling African National Congress in December and as president in 2019, has previously downplayed suggestions that he intends to reorganize his cabinet and fire Gordhan.
‘Radical Step’
“It’s quite a radical step to recall the minister and his deputy in the middle of an international roadshow,” Mike Davies, the founder of political advisory company Kigoda Consulting, said by phone. “This doesn’t necessarily mean a reshuffle is now more imminent than it was before, but it shows that tensions clearly exist in the cabinet.”
The trip was properly authorized, Gordhan’s office said. Treasury spokeswoman Yolisa Tyantsi referred queries to the presidency when contacted by text message and email. Ngqulunga didn’t answer calls to his mobile phone.
“Tensions are already high between Zuma and Gordhan and so this will just serve to deepen their mutual hostility,” said Susan Booysen, a professor at the University of Witwatersrand’s School of Governance. “Zuma is watching for any foot fault by Gordhan and Jonas to have a pretext to fire them. Cabinet members are routinely given permission for overseas visits and if they do so without authorization, a simple phone call would suffice to chastise them.”