Zuma and Gordhan in battle to save South Africa’s ravaged economy

Commentators have been warning that the country’s political scandal is weighing on the economy – and now the ratings agencies have come to judge just how bad the damage will get.

South Africa's finance minister Pravin Gordhan speaks to president Jacob Zuma. Reuters

CAPE TOWN // The international ratings agencies Moody’s and Standard & Poor’s arrived in South Africa last week and began their most critical analysis of the state of the economy ever undertaken.

Many fear that after a series of interviews with business, bankers and government officials they will conclude that the political controversy surrounding the president Jacob Zuma, which has subsumed all else in the past few weeks, is now so bad that their only alternative is to downgrade the country’s bonds and international debts to junk status. The implications of that, as the finance minister Pravin Gordhan pointed out last week, could be “disastrous”.

Mr Gordhan, back in office after two of his predecessors were sacked in the same week by Mr Zuma in December, is doing all in his power to avert the catas­trophe. He is widely believed to be the leading figure behind a concerted attempt to unseat Mr Zuma, persuading his own deputy Mcebisi Jonas to go public last week with the shock announcement that, back in December, he had been offered the role of finance minister by the Indian-born Gupta family, which has close links with Mr Zuma, in return for unspecified favours that are believed to include the award of existing South African Airways routes and involvement in a nuclear power deal with Russia. Two other senior figures in the ruling African National Congress party have made similar claims, all of them fiercely denied by Zuma and ANC officials.

Given the evidence piling up against Mr Zuma by the day, it is difficult for even the most ­biased observers to believe him any longer. Just one of the accusations that tumbled out over last weekend came from the former head of the government's communications department, Themba Maseko, who claimed he was summoned by Mr Zuma and told he must "help" the Guptas by giving their New Age newspaper and their TV station more government advertising. At a subsequent meeting with the Guptas at their home in Johannesburg, he says he was told: "tell us where the money is and tell departments to give you money. If they refuse we will deal with them. If you have a problem with any department' we will summon ministers here".

Another minister claimed that if all his colleagues who have similarly been summoned to the Gupta home were put together, they would fill a football stadium.

At a three-day ANC conference at Irene, near Pretoria, over the weekend, the party’s relationship with the Guptas dominated even discussions about the economy. But at the end of what was said to be a very heated session, the party publicly supported its embattled president, which is scarcely surprising given the fact that an estimated 87 of the top 98 members of the national executive council owe their jobs to Mr Zuma.

There are now 35 cabinet ministers – twice the number under Nelson Mandela – each with a deputy, every single one of them appointed by Mr Zuma. All enjoy 5-series BMWs or equivalents, government houses, large offices, salaries that have doubled under Mr Zuma since he took power in 2009 and all the trappings that go with high office. As one disenchanted ANC member sourly pointed out to me: “Crossing Mr Zuma means a return to the village with no salary, no pension and no car – your family and friends are not going to care why you resigned on a matter of principle”.

Mr Gordhan, presiding over an economy that trembles on the brink of recession, with state-owned industries that are basically bankrupt, rising inflation, high interest rates (they rose again last week), a weak cur­­rency and one of the highest levels of unemployment in the world, is himself under threat. Within days of returning to his old job, he became the subject of an investigation by the Hawks, an elite police force controlled by the president’s office, on allegations of improperly setting up his own investigative unit inside the South African Revenue Service, for which he was responsible three years ago.

Mr Gordhan’s supporters see this as a blatant attempt to undermine him. But he is made of stern stuff and for the mom­ent, given the circumstances in which he was recalled, he is probably impregnable. His sacking now would trigger an economic crisis of such proportions that even Mr Zuma could not survive it.

This week the finance minister’s sole focus is the rating agencies – and he may yet win the day, or at least a postponement. One of the country’s most senior businessmen, with huge international interests, told me he had tried to present a different picture to Moody’s when they came to visit him at his office. Despite Mr Zuma, he ­argued, South Africa is a remark­ably resilient, rich and resourceful country that survived the years of apartheid and isolationism and will come through this crisis as well. It has been written off many times in the past, he told the agencies, and it is robust enough to survive Mr Zuma.

Mr Gordhan is desperately hoping he is right.

Ivan Fallon is a former business editor of The Sunday Times