Battle for South Africa’s Finances Rages on Multiple Fronts

Johannesburg, Capital Markets in  Africa: South Africa’s government appears to be at war with itself, as President Jacob Zuma and his Finance Minister Pravin Gordhan grapple for control of the nation’s finances.

While Zuma has downplayed the conflict, saying “there is no war within government,” he’s undermined Gordhan’s authority by refusing to back him in stand-offs with the police, national tax agency and loss-making state airline.

Several government agencies have been drawn into the fight. Here are the key battlegrounds:

The National Treasury
The Treasury’s tight rein over state finances has helped South Africa retain an investment-grade credit rating and its national budget is ranked among the world’s most transparent. Zuma’s decision to appoint little-known lawmakerDavid van Rooyen as his finance minister in place of the respected Nhlanhla Nene in December raised fears that the Treasury’s independence was under threat and sparked a run on the rand and nation’s bonds. After business and ruling party leaders lobbied Zuma to change course, he reinstated Gordhan to the post of finance chief, which he had held from 2009 to 2014. Deputy Finance Minister Mcebisi Jonas said in March that the Gupta family, who are friends with Zuma, had offered him the position of finance minister before Nene was fired.

The Hawks
The elite police investigative unit known as the Hawks is investigating Gordhan, warning that he may face arrest for setting up an allegedly illicit surveillance unit when he led the national tax agency almost a decade ago. Gordhan says he hasn’t broken any laws. While Zuma says he can’t interfere in the case, opposition parties say he wants to use it to install a more pliant head of the Treasury. The Hawks have referred the case to the National Prosecuting Authority, which is deciding whether to charge Gordhan. Meanwhile, the Helen Suzman Foundation has filed a lawsuit aimed at overturning the police minister’s appointment of Berning Ntlemeza as head of the Hawks. The High Court last year ruled that Ntlemeza was untrustworthy and lied under oath, a finding the Johannesburg-based non-profit group said rendered him unfit to hold office. The Pretoria High Court is due to hear that case in December.

The South African Revenue Service
Tom Moyane, who Zuma appointed commissioner of the South African Revenue Service in 2014, asked for an investigation into whether the tax agency had breached the law before he took over, triggering the probe by the Hawks into Gordhan’s conduct. While the finance ministry oversees the tax agency, Moyane has defied Gordhan’s authority and ignored his order to halt a management overhaul. The finance minister described Moyane’s behavior as “totally unacceptable” and asked Zuma to fire him — a request the president refused.

The Banks
The nation’s largest lenders were caught in the political crossfire when they said they will close accounts belonging to companies owned by members of the Guptas, who are in business with Zuma’s son and employed one of his four wives. While Gordhan and two other cabinet ministers were tasked with investigating the decision, the banks said they weren’t able to discuss it because they couldn’t breach client confidentiality. Mineral Resources MinisterMosebenzi Zwane then announced that the cabinet had authorized a judicial inquiry to review the banking oversight system, and said the government had to ensure lenders didn’t unfairly withhold banking services. Zuma rebuked Zwane and denied authorizing a judicial review. Gordhan said he saw no need for a probe because the courts offered adequate recourse to anyone who felt aggrieved by the banks.

State-Owned Companies
Gordhan and the Treasury have been in open conflict with several state companies over their management and spending plans. The Treasury accused power utility Eskom Holdings SOC Ltd. of stalling efforts to review its contracts, including one struck with a company in which the Guptas have a stake. It threatened legal action against state arms company Denel SOC Ltd. to stop it from entering into a joint venture in Asia with a company controlled by Gupta associates. Both companies and the Gupta family issued statements denying any wrongdoing.

The Financial Intelligence Center
The Financial Intelligence Center, which targets money laundering, has also come under attack, with Zwane calling for it to be overseen by the Ministry of State Security rather than the Finance Ministry. Zuma hasn’t signed off on a law that’s been passed by Parliament and will enhance the center’s ability to investigate people with a high political profile, their families and their business connections after an objection from the Progressive Professionals Forum.

Source: Bloomberg Business News