This is a power show by Zuma who clearly believes he has enough power in the NEC and low enough risk of a parliament split to be removed, to basically do what we wants here.

As expected PGxit occurred and the Deputy removed as well in an open attack on National Treasury. The reshuffle is designed to lubricate the way to the elective conference through NT and a variety of major other ministries.

The market will struggle to digest Gigaba. Someone who has been effective at home affairs but is clearly being put in a role to do a particular job by Zuma and viewed as loyal to Zuma. Similarly with Buthalezi. As we laid out in the piece on Wednesday we view this as an open attack on Treasury to replace people who are conservative and anti-corruption with people loyal to Zuma to help the Zuma faction win in December. This is an attack on the institution of National Treasury and as such will trigger multiple downgrades. As we’ve highlighted before whilst there are some fiscal risks we are more worried about NT’s role in procurement, preventing corruption and oversight of SOEs including nuclear and banking. We think this is bad for the market and for SA. Equally there are questions hanging over Buthalezi around his role at PRASA and the links of both to various others such as the Guptas. This will concern the market and I think the market will be deeply worried by these appointment.

Looking at this list is really is a list of largely unknows…. Importantly Zwane mining minister remains which was a top 6 ask that he be removed and given his closeness to Zuma. Other ministers also not removed who were seen as under-performing Zuma loyalists like Social Development Minister and Comms Minister moved portfolio but staying in cabinet.

Zuma is taking a risk here and the next step is to watch what happens with resignations. A key risk of resignations now from SACP members and it was a surprise that more of them haven’t been removed. Maybe he wants to goad them to go to allow for a bigger reshuffle next. It is odd that for instance NDZ hasn’t entered at this stage…. maybe he is waiting for Ramaphosa to resign and then put her there? This is the next step we watch for. This is not over yet.

We must also consider the growth shock here like after Nene-gate is going to make things harder on the fiscal side with difficult choices on revenues and probably a decision to debt finance instead. This will reinforce the need for ratings downgrades. But as we said before, fiscal will not be the main focus but procurement etc.

The market has been far too complacent that Zuma cannot remove PG but he has now gone and done it and yet the market is still hanging onto the hope of a credible candidate which has not come with a complete clear out at NT. This is a full whack Zuma led reshuffle which will lead to multiple imminent downgrades where Zuma is confident he has the upper hand over weak internal ANC opposition. The market will be watching blowback risk now as the next reason to be too positive on this. The opposition to Zuma is too split with too weak a leadership in the NEC to be effective here. Zuma believes he is, and we think he is, much stronger than the market thinks he is. The market has a lot of cathhing up to do still I think to the reality on the ground.