South African investors want the ruling African National Congress to explain in detail what the &#8220;radical economic transformation&#8221; it has pledged in recent speeches means, Finance Minister Malusi Gigaba said on Wednesday.
President Jacob Zuma has said he will redistribute wealth in the economy &#8211; still largely held by a white minority &#8211; to poor black people, a call echoed by Gigaba since he was named finance minister in a shock cabinet reshuffle last month.
However, there were few concrete policies on how this will be achieved, and Zuma&#8217;s transformation push has been criticised by opponents who say it echos populist promises made by the ruling party since the end of apartheid in 1994.&#8221;
&#8220;The sense from the investors is we need to explain in detail what we mean by radical economic transformation &#8230; we don&#8217;t want to create a disjuncture between growth and development,&#8221; Gigaba said after speaking to local investors at the Development Bank of South Africa.
Last week Fitch downgraded South Africa&#8217;s foreign and local currency debt to speculative grade, while S&amp;P Global Ratings cut the hard currency borrowing to &#8220;junk&#8221;.
Both cited likely changes in economic policy after respected finance minister Pravin Gordhan was fired, a move that rattled markets and sparked opposition protests against Zuma. [nL8N1HF20O]
Gigaba also said Treasury is committed to fiscal consolidation plans outlined in the 2017 budget by his predecessor Gordhan after S&amp;P and Fitch downgraded the country.
Gigaba said the Treasury aims to stabilise the government&#8217;s net debt over the next three years at 50 percent of gross domestic production (GDP). It now stands at 45.5 percent and projected to reach 48.1 percent in 2019.
&#8220;To accomplish this we are tightly controlling expenditure,&#8221; Gigaba said. &#8220;Fiscal sustainability is a prerequisite for inclusive development &#8230; we are therefore committed to the fiscal consolidation plans as outlined in the February budget.&#8221;
With unemployment at a near record, the ANC is under increasing pressure to address gaping inequality that persists 23 years after the end of white-minority rule.
Black people make up 80 percent of the population, yet the lion&#8217;s share of the economy in terms of ownership of land and companies remains in the hands of white people, who make up about 8 percent of the population.
Gigaba reiterated that South Africa&#8217;s nuclear-expansion plan will be implemented &#8220;at a pace and scale that the country can afford&#8221; in brief remarks to reporters. &#8220;Any procurement of nuclear energy will follow due process,&#8221; he said.
Critics of the expansion plan estimated to cost 1 trillion rand ($73 billion), say Treasury can ill afford the project.
&nbsp;
(Writing by Nqobile Dludla and James Macharia; Editing by Toby Chopra)
&nbsp;

Investors want ANC to explain “radical economic transformation”: Gigaba

<div class="storify"><iframe loading="lazy" src="//storify.com/cnbcafrica/live-oppositionmarch/embed?border=false" width="100%" height="750" frameborder="no"></iframe><script src="//storify.com/cnbcafrica/live-oppositionmarch.js?border=false"></script><noscript>[<a href="//storify.com/cnbcafrica/live-oppositionmarch" target="_blank">View the story &#8220;LIVE: #OppositionMarch protesting for SA President Zuma to step down&#8221; on Storify</a>]</noscript></div>

LIVE: National #OppositionMarch protest for SA President Zuma to step down

By Tanisha Heiberg and James Macharia
South African President Jacob Zuma on Monday accused some protesters of racism after marches last week that drew tens of thousands of people demanding his resignation, while the opposition announced plans for a new protest.
More than 60,000 people marched in South African cities on Friday in largely peaceful protests to demand Zuma quit after a cabinet reshuffle set off the latest crisis of his presidency.
Speaking at a memorial to commemorate the 24th anniversary of the assassination of anti-apartheid and Communist Party leader Chris Hani &#8211; whose murder led to nationwide riots &#8211; Zuma said South Africa had not yet built a non-racial society decades after white-minority rule ended in 1994.
<blockquote>In his first public response to the protests, Zuma said they &#8220;demonstrated that racism is real&#8221; in South Africa.
&#8220;Many placards and posters displayed beliefs that we thought had been buried in 1994, with some posters depicting black people as baboons,&#8221; the president said.
&#8220;It is clear that some of our white compatriots regard black people as being lesser human beings or sub-human.&#8221;</blockquote>
A mixed racial profile of people attended the rallies. Police said about 60,000 people took part in the marches in the major cities.
Opposition leader Mmusi Maimane, head of the Democratic Alliance (DA), which has strong support among white people, had called for a march in Johannesburg, and held a rally of more than 10,000 people.
In the capital Pretoria, about 15,000 people gathered in a field outside the Union Buildings, the site of Zuma&#8217;s offices, in a march led by civil society group SaveSA. Other marches were held in Cape Town, Durban and other parts of the country.
Maimane&#8217;s spokesman Mabine Seabe said of Zuma&#8217;s comments: &#8220;He cannot argue based on policy and is trying to distract from the issues by using race as a scapegoat.&#8221;
Zuma&#8217;s spokesman Bongani Ngqulunga also said there were posters in Pretoria that depicted black people as baboons. Ngqulunga sent a picture to Reuters that has been used on Twitter showing a Zuma caricature.
Some placards during the protests used vulgar language against Zuma, Reuters witnesses said.
<blockquote>&#8220;It&#8217;s been proven before that if you place a racial bombshell in a conversation it clouds the issues,&#8221; said Gwen Ngwenya, the chief operating officer of the South African Institute of Race Relations in Johannesburg.</blockquote>
&#8220;It&#8217;s an effective spin strategy that&#8217;s very shrewd &#8230; because it plays on historical racial tensions in South Africa.&#8221;
NEW PROTEST
The DA, the ultra-left Economic Freedom Fighters and other smaller parties announced a new protest march dubbed &#8220;National Day of Action&#8221; on Wednesday at the Union Buildings, the seat of government, aimed at drumming up support for a no-confidence motion against the president in parliament on April 18.
The African National Congress, which has a commanding majority in parliament, has said its members would vote against the motion.
Zuma&#8217;s sacking of Finance Minister Pravin Gordhan in a cabinet reshuffle on March 31 has outraged allies and opponents alike, undermined his authority and caused rifts in the ANC, which has governed South Africa since the end of apartheid.
The rand has tumbled more than 11 percent since March 27, when Zuma ordered Gordhan to return home from overseas talks with investors, days before firing him.
Fitch on Friday followed S&amp;P Global Ratings and downgraded South Africa to &#8220;junk&#8221;, citing Gordhan&#8217;s dismissal as one reason.
On Monday, Zuma said he had met Finance Minister Malusi Gigaba, the Governor of the South African Reserve Bank Lesetja Kganyago and Tom Moyane, the Commissioner of the South African Revenue Service, to discuss the impact of the credit rating downgrades and &#8220;how we should respond adequately.&#8221;
Zuma reiterated plans to transform the economy to include more black people, who, he said, were passed up for promotions and had lower salaries than white people doing the same jobs.
<blockquote>&#8220;The majority of black people are still economically disempowered. They are dissatisfied with the limited economic gains from liberation,&#8221; he said.</blockquote>
Black people make up 80 percent of the population, yet the lion&#8217;s share of the economy in terms of ownership of land and companies remains in the hands of white people, who make up about 8 percent of the population.
(Writing by James Macharia; Editing by Janet Lawrence)

South Africa’s Zuma accuses protesters of racism after marches

South Africa&#8217;s tender for the estimated 1 trillion-rand ($72 billion) expansion of its nuclear power plants will begin in June when state utility Eskom requests proposals from companies bidding for the project, City Press newspaper reported on Sunday.
South Africa, which has Africa&#8217;s only nuclear power station, wants nuclear power to play the leading role in expanded power generation, easing the country&#8217;s reliance on an ageing fleet of coal-fired plants. It has asked Eskom to procure an additional 9,600 megawatts (MW) of capacity.
<blockquote>Rebutting the report, National Treasury head of communication Yolisa Tyantsi said a meeting or presentation with Eskom on March 28 &#8220;was not on the state of readiness to procure&#8221; more nuclear power.
&#8220;National Treasury is not in a position to publicly disclose the discussions,&#8221; she said.</blockquote>
The City Press reported that an internal Eskom document indicates that the country&#8217;s nuclear programme will get underway.
According to the document, Eskom will issue requests for proposals in June, set the deadline for bids in September and for evaluation in December. The winning bidder will be decided in March 2018, the newspaper said, and the contract will be signed between December 2018 and March 2019.
Eskom&#8217;s spokesperson Khulu Phasiwe said &#8220;nothing at this stage has been decided on, those dates were suggestive dates.&#8221;
&#8220;If everything goes well, we will issue a request for proposals around June,&#8221; said Phasiwe, adding that the national treasury, department of energy and the department of public enterprises still have to make their own findings.
In February, 27 companies showed preliminary interest in the country&#8217;s plans to build more nuclear reactors after Eskom in December asked them to provide information on nuclear power costs and financing options. Companies have until April 28 to provide their information.
http://cnbc.africa/news/2016/11/09/edf-ready-to-take-part-in-tender-for-south-africa-nuclear-reactors/
<blockquote>&#8220;I don&#8217;t see it starting to happen in June. There are steps that need to happen and there is a determination that treasury has to make about affordability, and we are not near that right now,&#8221; said National Treasury spokesperson Mayihlome Tshwete.</blockquote>
Critics of the plan have raised questions about environmental risks and costs.
<blockquote>&#8220;The undeniable fact is that South Africa cannot afford, and does not need, the nuclear deal,&#8221; Natasha Mazzone, the opposition Democratic Alliance&#8217;s shadow minister of public enterprises, said in a statement.
&#8220;Indeed, international ratings agencies agree and this deal has been repeatedly cited as a cause for great concern and a key factor in downgrades not only for Eskom, but the country as a whole.&#8221;</blockquote>
Fitch on Friday followed S&amp;P Global Ratings and downgraded South Africa to &#8220;junk&#8221;, citing among other factors differences over the country&#8217;s nuclear programme, along with President Jacob Zuma&#8217;s decision to sack Pravin Gordhan as finance minister.
http://cnbc.africa/news/southern-africa/2016/11/03/nuclear-energy-not-for-south-africa/
($1 = 13.7525 rand)
(Reporting by Nqobile Dludla,; Editing by Larry King and Stephen Powell)
&nbsp;

South Africa’s $72 billion nuclear project to move in June, newspaper reports

Fitch Ratings-Hong Kong-07 April 2017: Fitch Ratings has downgraded South Africa&#8217;s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to &#8216;BB+&#8217; from &#8216;BBB-&#8216;. The Outlooks are Stable.
The issue ratings on South Africa&#8217;s senior unsecured foreign- and local-currency bonds have been downgraded to &#8216;BB+&#8217; from &#8216;BBB-&#8216;. The rating on the sukuk trust certificates issued by RSA Sukuk No. 1 Trust has also been downgraded to &#8216;BB+&#8217; from &#8216;BBB-&#8216;, in line with South Africa&#8217;s Long-Term Foreign-Currency IDR.
The Short-Term Foreign-and Local-Currency IDRs and the rating on the short-term local-currency securities have been downgraded to &#8216;B&#8217; from &#8216;F3&#8217;. The Country Ceiling has been revised down to &#8216;BBB-&#8216; from &#8216;BBB&#8217;.
KEY RATING DRIVERS
The downgrade of South Africa&#8217;s Long-Term IDRs reflects Fitch&#8217;s view that recent political events, including a major cabinet reshuffle, will weaken standards of governance and public finances.
In Fitch&#8217;s view, the cabinet reshuffle, which involved the replacement of the finance minister, Pravin Gordhan, and the deputy finance minister, Mcebisi Jonas, is likely to result in a change in the direction of economic policy. The reshuffle partly reflected efforts by the out-going finance minister to improve the governance of state-owned enterprises (SOEs). The reshuffle is likely to undermine, if not reverse, progress in SOE governance, raising the risk that SOE debt could migrate onto the government&#8217;s balance sheet.
Differences over the country&#8217;s expensive nuclear programme preceded the dismissal of a previous finance minister, Nhlanhla Nene, in December 2015 and in Fitch&#8217;s view may have also contributed to the decision for the recent reshuffle. Under the new cabinet, including a new energy minister, the programme is likely to move relatively quickly. The state-owned electricity company, Eskom, has already issued a request for information for nuclear suppliers and is expected to issue a request for proposals for nuclear power stations later this year. The treasury under its previous leadership had said that Eskom could not absorb the nuclear programme with its current approved guarantees, so the treasury will likely have to substantially increase guarantees to Eskom.
This would increase contingent liabilities, which are already sizeable. According to the 2017/18 budget, the government&#8217;s guarantee exposure to public institutions was ZAR308.3 billion at end-March 2017, up from ZAR255.8 billion a year earlier. The main SOEs had additional liabilities of ZAR463 billion in 2016 with no explicit guarantee but with a significant probability that the government would step in should SOEs be unable to service the debt. The government has repeatedly needed to support SOEs, including Eskom, which is responsible for a large share of liabilities.
The new finance minister has stated that he does not intend to change fiscal policy and remains committed to expenditure ceilings that have been a pillar of fiscal consolidation. However, Fitch believes that following the government reshuffle, fiscal consolidation will be less of a priority given the president&#8217;s focus on &#8220;radical socioeconomic transformation&#8221;. This means that renewed shortfalls in revenues, for example as a result of lower than expected GDP growth, are less likely to be compensated by expenditure and revenue measures. This could put upward pressure on general government debt, which at an estimated 53% of GDP at end-March 2017 was already slightly above the &#8216;BB&#8217; category median of 51%.
The tensions within the ANC will mean that political energy will be absorbed by efforts to maintain party unity and fend off leadership challenges and to placate rising social pressures for addressing inequality, poverty and weak public service delivery. The Treasury&#8217;s ability to withstand departmental demands for increased spending may also weaken.
Political uncertainty was already an important factor behind weak growth last year, as in Fitch&#8217;s assessment it has affected the willingness of companies to invest. The agency believes that the cabinet reshuffle will further undermine the investment climate. Fitch forecasts GDP growth of 1.2% in 2017 and 2.1% in 2018, but the reshuffle has raised downside risks.
South Africa&#8217;s ratings also reflect the following key rating drivers:
The current account deficit narrowed to 3.3% of GDP in 2016 from 4.4% in 2015, on the back of import compression reflecting weak domestic demand, low oil prices and increasing investment income from abroad. This improvement, together with the flexible exchange rate, will contain pressures should external financing dry up. The government&#8217;s low reliance on foreign-currency financing, which accounted for just 11.3% of debt at end-March 2017, is also helping to contain external pressures.
Most indicators of economic development are in line with &#8216;BB&#8217; category medians. GDP per capita at market prices is estimated at USD5,207 for 2016, compared with a median of USD5,007. The World Bank&#8217;s governance indicator, at the 59th percentile, is well above the &#8216;BB&#8217; median and more in line with the &#8216;BBB&#8217; median. However, this may not adequately reflect governance issues that were highlighted in the recent state of capture report by the public prosecutor and governance may deteriorate as a result of the reshuffle. The rating is supported by a sound banking sector, which has a Fitch Bank Systemic Risk Indicator of &#8216;bbb&#8217;.
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch&#8217;s proprietary SRM assigns South Africa a score equivalent to a rating of &#8216;BBB&#8217; on the Long-Term FC IDR scale.
Fitch&#8217;s sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to rated peers, as follows:
&#8211; Macroeconomic Performance, Policies and Prospect: -1 notch, to reflect South Africa&#8217;s weak growth prospects relative to the &#8216;BBB&#8217; category median, with important repercussions for public finances.
&#8211; Structural Features: -1 notch, to reflect the expected deterioration in governance standards, particularly related to SOEs.
Fitch&#8217;s SRM is the agency&#8217;s proprietary multiple regression rating model that employs 18 variables based on three year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch&#8217;s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.
RATING SENSITIVITIES
The following risk factors could, individually or collectively, result in negative rating action:
&#8211; A failure to stabilise the government debt/GDP ratio or an increase in contingent liabilities.
&#8211; Failure of GDP growth to recover sustainably, for example, due to sustained uncertainty about economic policy.
&#8211; Rising net external debt to levels that raise the potential for serious financing strains.
The following risk factors could, individually or collectively, result in positive rating action:
&#8211; An improvement in governance standards that is supportive of a stronger business and investment climate and a sustained upturn in economic growth.
&#8211; A marked narrowing in the budget deficit and a reduction in the government debt/GDP ratio.
&#8211; An improvement in the country&#8217;s net external debt/GDP ratio.
KEY ASSUMPTIONS
Fitch expects global economic trends and commodity prices to develop as outlined in Fitch&#8217;s March Global Economic Outlook.

Fitch Downgrades South Africa to junk for both local & foreign currency

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LIVE: Mass marches in South Africa

By Ed Stoddard
President Jacob Zuma&#8217;s pledge to expropriate South African land is unlikely to lead to violent seizures of farms like those that impoverished neighbouring Zimbabwe, but could still hurt the economy by scaring off investors worried about property rights.
Zuma is fighting to retain control of South Africa against opponents within the ruling African National Congress who want him to resign the party leadership.
http://cnbc.africa/news/southern-africa/2017/04/05/s-anc-rejects-calls-zuma-quit/
The confrontation came to a head last week when Zuma sacked Finance Minister Pravin Gordhan, who was often at odds with the president but widely respected by financial markets and whose dismissal triggered a credit downgrade.
Faced with opposition mainly from urban constituencies within the ANC, the president has doubled down on appeals to the rural poor, renewing promises to change the constitution to expropriate land without compensation and redistribute it.
<blockquote>&#8220;You can’t have a constitution that keeps people in poverty,&#8221; he told traditional leaders last week.</blockquote>
Zuma has reminded the party that &#8220;expropriation without compensation&#8221; was adopted as official policy at the ANC&#8217;s 2012 conference.
More than two decades after the end of apartheid rule, most of South Africa&#8217;s land is still in the hands of minority whites. Zuma&#8217;s ruling ANC has long been committed to the principle of redistributing it.
But the pace has been slow, relying mostly on a &#8220;willing buyer, willing seller&#8221; policy intended to respect property rights seen as vital to sustaining Africa&#8217;s most industrialised economy.
South Africa has many safeguards that should prevent the sort of lawlessness and violence that took place when followers of Zimbabwean President Robert Mugabe stormed onto white-owned farms in the early 2000s.
Zuma himself has said South Africa will not embark on the kind of lawless land grabs that saw Zimbabwe slide from breadbasket to basket case. Unlike Zimbabwe, South Africa has a robust, independent judiciary to keep the government in line.
Nor is South Africa as dependent on farming for its income as its northern neighbour: agriculture accounts only for about two percent of gross domestic product.
But the threat to redistribute land could still harm a sector which is a major employer and feeds a drought-prone nation, and any move to curb property rights could have wider economic repercussions by alarming investors in other sectors.
RHETORIC TO REALITY?
Changing the constitution as Zuma says he intends would not be easy, with the ANC so sharply divided over his leadership.
<blockquote>&#8220;The checks and balances in South Africa and the waning political support for the ANC itself make it difficult to disregard or change the constitution,&#8221; said Daniel Silke, the director of Political Futures Consultancy. &#8220;We are in a very different space to what was a very autocratic Zimbabwe.&#8221;</blockquote>
Zuma&#8217;s political woes, including electoral setbacks in major urban centres in local elections last year, explain his populist approach to the land issue.
It is part of a &#8220;radical economic transformation&#8221; drive aimed at the ANC&#8217;s increasingly rural support base. His plans will be high on the agenda of a major party policy conference in June-July, and another in December when Zuma&#8217;s successor as ANC leader is to be picked ahead of a general election in 2019.
<blockquote>&#8220;Deploying populist rhetoric is a powerful campaign strategy that has worked for Zuma before,&#8221; said Ruth Bookbinder, Africa Analyst at risk consultancy Verisk Maplecroft.</blockquote>
The Department of Rural Development and Land Reform says only 8 million hectares of arable land has been transferred to black people since 1994, less than 10 percent of the 82 million hectares available and a third of the ANC&#8217;s 30 percent target.
Yet the ANC has not yet fallen into line behind Zuma&#8217;s call for constitutional change. In February, ANC MPs voted down a motion by the ultra-left Economic Freedom Fighters (EFF) party to amend the constitution to take land without compensation.
ZIMBABWE PARALLELS
Zuma&#8217;s bid for rural support has parallels with Zimbabwe in 2000, when Mugabe, then in power for two decades, faced a challenge from an opposition rooted in the urban trade union movement.
Mugabe responded by unleashing violent invasions of white-owned farms that proved devastating to an economy already in meltdown, with acute balance of payments pressures, raging inflation, slowing growth, a depreciating currency and a dependency for funding on the International Monetary Fund.
Zuma too faces challenges from urban quarters, including calls for him to resign from the South African Communist Party and labour federation Cosatu, both allies of the ANC.
The economy is barely growing, the rand currency is vulnerable, inflation could reignite, and further ratings downgrades could push South Africa into the IMF&#8217;s embrace, which would see it forced to adopt austerity measures that ANC populists would baulk at.
Damaging South Africa&#8217;s high-tech agriculture sector through land seizures could have far-reaching consequences. Wandile Sihlobo, an economist at the agricultural business chamber, told Reuters he reckons the debt book for commercial agriculture is around 160 billion rand ($11.6 billion).
Food security is a concern as South Africa recovers from a drought, with forecasts showing another potentially looming.
Some analysts say such consequences will not dissuade Zuma.
&#8220;Zuma has shown he can be absolutely reckless in pursuit of his political agenda,&#8221; said NKC African Economics political analyst Gary van Staden.
($1 = 13.7680 rand)
(Editing by James Macharia and Peter Graff)

S.Africa’s land expropriation unlikely to end like Zimbabwe

On April 3, 2017, S&amp;P Global Ratings lowered its foreign currency ratings on South Africa to &#8216;BB+/B&#8217; from &#8216;BBB-/A-3&#8217;. The outlook is negative. We also lowered our national scale rating on South Africa to &#8216;zaAA-&#8216; from &#8216;zaAAA&#8217;.
• We do not rate financial institutions in South Africa above the foreign currency sovereign ratings, due to the direct and indirect impact that a sovereign distress would have on banks&#8217; operations.
• As a result, we are lowering our ratings on FirstRand Bank Ltd., FirstRand Ltd., Nedbank Ltd., Investec Bank Ltd., Absa Bank Ltd., Barclays Africa Group Ltd., and BNP Paribas Personal Finance South Africa Ltd. (BNPPPF), and our rating on the domestic medium-term note program issued by BNP Paribas (acting through its local branch).
• The negative outlooks on the first four entities reflect that on the sovereign and indicate that we could lower the ratings further if we lower our foreign currency ratings on South Africa.
• The other three entities and the note program carry national scale ratings only, to which we do not assign outlooks.
S&amp;P Global Ratings said today that it has lowered its ratings on five South Africa-based financial institutions and two related holding companies, as well as its national scale rating on the domestic medium-term note (MTN) program issued by BNP Paribas through its local branch.
More specifically, we lowered, to &#8216;BB+/B&#8217; from &#8216;BBB-/A-3&#8217;, our long- and short-term counterparty credit ratings on FirstRand Bank Ltd., Nedbank Ltd., and Investec Bank Ltd. In addition, we lowered our long-term counterparty credit rating on FirstRand Ltd. to &#8216;BB-&#8216; from &#8216;BB+&#8217;, while affirming the &#8216;B&#8217; short-term counterparty credit rating. The outlooks are negative.
At the same time, we lowered our long-term South Africa national scale ratings on FirstRand Bank, Nedbank, Investec Bank, and BNP Paribas Personal Finance South Africa Ltd. (BNPPPF) to &#8216;zaA&#8217; from &#8216;zaAA-&#8216;. We affirmed our &#8216;zaA-1&#8217; short-term national scale ratings on the four entities.
We have lowered to &#8216;zaBB+/zaB&#8217; from &#8216;zaA/zaA-2&#8217; our long- and short-term national scale ratings on Barclays Africa Group Ltd. and FirstRand Ltd., the nonoperating holding companies (NOHCs) of their respective financial services groups.
We also lowered our long-term national scale ratings on Barclays Africa Group&#8217;s subsidiary, Absa Bank Ltd., to &#8216;zaA&#8217; from &#8216;zaAA-&#8216;, while affirming our &#8216;zaA-1&#8217; short-term national scale rating. 
Lastly, we lowered to &#8216;zaA&#8217; from &#8216;zaAA-&#8216; our long-term national scale rating on the South African rand (ZAR) 10 billion MTN program issued by BNP Paribas (acting through its local branch). We affirmed our &#8216;zaA-1&#8217; short-term national scale rating on the program.
The rating actions follow the lowering of our foreign and local currency sovereign credit ratings on South Africa (see &#8220;South Africa Long-Term Foreign Currency Rating Cut To &#8216;BB+&#8217; On Political And Institutional Uncertainty; 
Outlook Negative,&#8221; published April 3, 2017, on RatingsDirect).
We lowered our ratings on the financial institutions because we do not rate South African banks above the foreign currency sovereign credit ratings. This is because of the likely direct and indirect influence of sovereign distress on domestic banks&#8217; operations, including their ability to service foreign currency obligations. The more pronounced downgrades of the NOHCs of the Barclays Africa Group and FirstRand Group reflect our view of the increasing risk of structural subordination following the downgrade of the operating bank entities to speculative grade (below &#8216;BBB-&#8216;). As a result of this,combined with the respective downgrades of the operating entities, we lowered our national scale ratings on the NOHCs by five notches, in line with our mapping 
criteria.
The national scale ratings on the ZAR10 billion domestic MTN program are supported by the global scale ratings on BNP Paribas, but constrained by the foreign currency sovereign credit ratings on South Africa. The lowering of the ratings on South Africa reflects our view that political and institutional stability in the country has weakened. However, amid slow economic growth and political turbulence, South African banks have been 
performing resiliently.
The sector&#8217;s average return on assets improved to 1.3% in 2016 from 1.1% the previous year, while total capital adequacy increased to 15.7% from 14.2%. We anticipate that credit losses for the top-tier banks will 
stabilize at 0.8%-1.0% in 2017. However, if decreasing investor confidence materially damages the local currency, sparking rising inflation and interest rates, banks&#8217; credit losses could accelerate toward the year&#8217;s end, due to the over-leveraged South African households and pressure on their disposable income to service their debt. Accordingly, this could erode the top-tier banks&#8217; profitability, resulting in lower returns on equity in 2017 than the currently anticipated 15%-19%.
The negative outlooks on FirstRand Bank, FirstRand Ltd., Investec Bank, and Nedbank reflect that on the sovereign. We would lower our ratings on these entities or revise the outlooks to stable should there be a similar action on 
the sovereign. Outside a sovereign action, we see positive or negative rating actions on these four banks as a remote possibility in the next 12 months, unless there is significant deterioration of the economy, due for example to weaker investor confidence.
Our national scale ratings have no outlooks but, for financial institutions in 
South Africa, are exposed to changes in the ratings on the sovereign and the 
economic environment.

S&P downgrades seven South African banks

The Office of the ANC Chief Whip confirms the resignation of former Deputy Finance Minister and ANC MP Cde Mcebisi Jonas as a member of parliament effective 31 March 2017. 
Comrade Jonas has served both as Deputy Minister and MP with absolute distinction and dedication. He has also served the movement and the South African people in various capacities over the years. On behalf of the ANC in Parliament we thank comrade Jonas for his selfless service to the movement as its public representative.
We are confident that he will continue serving the country and our movement in other capacities in future. We wish him well.

Former Deputy SA finance minister Mcebisi Jonas resigns as MP

If South Africa loses two of its prized investment grade credit ratings for foreign and local currency borrowing in the turmoil triggered by the sacking of the finance minister, the country could lose more than $10 billion in investment funds.
S&amp;P Global has already struck. In an unscheduled review on Monday that prompted a selloff in South African assets, it cut the sovereign rating for external debt to BB+, one notch below investment grade &#8211; or &#8220;junk&#8221; status in market parlance.
It cited the impact of the divisions in government that led to Pravin Gordhan&#8217;s removal.
Moody&#8217;s later placed South Africa on review for downgrade. A third major international ratings firm Fitch warned that President Jacob Zuma&#8217;s shake-up intensified political risk and signalled policy changes that could undermine its credit score.
Being downgraded to junk by at least two agencies will see South Africa drop out of some widely used global bond indexes that rely on investment grades only and force international funds who track these or who are prohibited from holding sub-investment grade securities to sell.
&#8220;The problem has just started in South Africa &#8211; there was a lot of complacency on the ratings shift,&#8221; said Salman Ahmed, chief global strategist at Lombard Odier.
The prospect of such a demotion is more imminent for hard currency debt, where Fitch&#8217;s standing rating is just one notch above junk. The Moody&#8217;s rating is two rungs above.
But a bigger impact on the country&#8217;s access to funds could come if two of the three agencies also demoninate the rand-denominated government debt as sub-investment grade. S&amp;P&#8217;s local currency rating is just one level above junk as well, with Moody&#8217;s two notches above.
So far, only one of the six ratings &#8211; three for sovereign debt and three for local &#8211; from the major international ratings agencies has slipped into junk.
JPMorgan &#8211; which compiles some of the most widely used emerging market debt indexes &#8211; estimates that a junk rating for South Africa&#8217;s mostly dollar-denominated foreign currency Eurobonds could see forced selling of up to $2.4 billion.
Roughly half the total would come from funds dedicated to investment grade emerging market debt, the other half from global investment grade bond funds, JPMorgan said, adding this was much less than the forced selling risk the bank had ascribed in recent years to Brazil at $6 billion or Turkey at $7 billion.
&#8220;The more modest figure for South Africa is explained by the smaller bond stock, and therefore smaller weights particularly in widely used global bond indexes, coupled with an underweight positioning by investors,&#8221; the bank said.
LOCAL DANGER
Yet South Africa&#8217;s outstanding $14.6 billion hard-currency debt is just a 10th of total public government debt, with local sovereign bonds tallying up to 1.722 trillion rand ($125 billion), according to data from the National Treasury.
For UBS, the real danger lies in local bond markets. In a note this week, UBS estimated some $10 billion of South African bond holdings are indexed to Citi&#8217;s World Government Bond Index (WGBI), tracked by $3 trillion worldwide.
JPMorgan, which compiles the GBI-EM IG-only index, said it estimated that a downgrade of local currency debt could lead to total index-related selling of as much as $8.5 billion.
Inclusion in both indexes hinges on investment grade ratings on local debt from both Moody&#8217;s and S&amp;P Global. Whle a formal index exclusion could take up to a year, many funds would likely exit the debt in advance.
Partially offsetting that hit is the fact that countries which find themselves downgraded to junk &#8211; so-called &#8220;fallen angels&#8221; &#8211; often draw in a different investor base seeking higher yields and more speculative investments, said Nafez Zouk, senior economist at Oxford Economics.
In other words, these fallen credits become bigger fish in smaller ponds.
Some dedicated emerging market fund managers are waiting for those opportunities.
&#8220;(South Africa&#8217;s) trajectory is quite negative and is likely to continue to be negative until we see renewal in South African politics which could be a few years from now,&#8221; said Jan Dehn at emerging market fund manager Ashmore Investment Management.
&#8220;Even in a gradually deteriorating credit like South Africa, asset prices can move into oversold territory relative to the risk &#8230; If prices fall enough that the credit has been oversold relative to how risky it is, then clearly that’s a buying opportunity.&#8221;
($1 = 13.7390 rand)
(Additional reporting by Sujata Rao in Moscow, Mfuneko Toyana in Johannesburg and Claire Milhench in London; Editing by Alison Williams)

“Junk”-rated debt could cost South Africa more than $10bn in lost funds

We have noted Standard and Poor’s (S&amp;P) decision to downgrade South Africa’s foreign currency credit rating to sub-investment grade, and the local currency to just one notch above investment grade, as well as their latest decision to downgrade South African banks in line with the sovereign rating. As a result, the national scale rating of Absa Bank Limited has been reduced to ‘zaA’ from its previous rating of ‘zaAA’.
Due to the intermediary role banks play in any economy it is the norm for their credit rating to be very closely linked to that of the country, and their decision to reduce the Absa Bank rating was therefore expected in light of recent events. S&amp;P does not rate South African banks above the foreign currency rating of the sovereign. Therefore, the downgrade of the sovereign has a direct impact to banks that are systemic to the economy.
We also acknowledge Moody’s announcement that they are putting South Africa under review for a downgrade.
These are very disappointing developments because until last week the country was building momentum towards better economic growth by the end of this year. During the past 14 months, Barclays Africa has actively participated in various initiatives in support of government’s efforts to effect much-needed structural reforms, in order to stimulate inclusive economic growth. We remain committed to doing so, but an abrupt interruption to this program is unhelpful and places at risk the livelihoods of many South Africans.
Barclays Africa is well-capitalised with a strong liquidity position and a balance sheet of over R1trillion. We remain well capitalised in terms of our strategy, risk appetite, risk profile, business activities and the macroeconomic environment in which we operate. We have a diversified portfolio of businesses with geographical presence across 10 countries in Africa and are determined to continue growing across all our markets.
For the year ended 31 December 2016 we released a solid set of results which included R239billion of liquidity reserves and we expect to remain robust from a liquidity and funding perspective. Our Common Equity Tier 1 (CET1) capital position as at 31 December 2016 remained strong at 12.1% (R105bn) &#8211; above our board target range of 9.5% to 11.5% and well above the regulatory minimum of 6.9%.
It takes enormous effort over many years to regain an investment grade sovereign rating. It is therefore very important that all stakeholders continue to work together to rediscover consensus on how to achieve inclusive growth.
&nbsp;

Barclays Africa responds to S&P downgrade of South African banks

South Africa&#8217;s ruling African National Congress backed President Jacob Zuma after two key allies of the party called for his resignation following a cabinet reshuffle that cost the country one of its investment-grade credit ratings.
The <a href="http://cnbc.africa/news/2017/03/29/expectations-gordhan-will-go-leave-south-african-markets-edge/">rand fell more than 1 percent and bonds weakened</a> after ANC Secretary General Gwede Mantashe told a media briefing on Wednesday that the ANC would not be part of a movement to remove Zuma, whose time at the helm of the party ends in December. Zuma&#8217;s presidential term will finish in 2019.
Last Thursday&#8217;s dismissal of finance minister Pravin Gordhan, a totem of policymaking stability for many foreign investors, was criticized by unions, civil society groups and the opposition, and has revived pressure on Zuma to quit.
Since taking office in 2009, the 74-year-old president has repeatedly denied accusations of corruption, and senior ANC officials have backed him.
Mantashe said the ANC had accepted the &#8220;irretrievable breakdown of the relationship&#8221; between Zuma and Gordhan as the reason the finance minister was sacked.
That move deepened a rift within the ruling party, with Deputy President Cyril Ramaphosa, a leading candidate to replace Zuma as ANC president, on Friday describing Gordhan&#8217;s removal as &#8220;totally, totally unacceptable&#8221;.
The South African Communist Party and the country&#8217;s biggest trade union, Cosatu, both historic allies of the ANC, have each called on Zuma to step down following the sacking.
Mantashe had also openly criticized Zuma&#8217;s actions but on Wednesday, he painted a different picture, saying the ANC would &#8220;close ranks&#8221; around the president.
The events that unfolded after the reshuffle had &#8220;created anxiety and undue confusion as a result of the discordant views, in particular of the National Officials of the ANC,&#8221; Mantashe said, referring to the criticism directed at Zuma.
&#8220;The officials &#8230; have further acknowledged that their public dissonance on the matter was a mistake that should not be committed again.&#8221;
Rating agency S&#038;P Global Ratings cited Gordhan&#8217;s dismissal as one reason for its downgrade of South Africa to &#8220;junk&#8221; in an unscheduled review on Monday.
(Reporting by Mfuneko Toyana; Writing by James Macharia; Editing by Catherine Evans)

S.A: ANC rejects calls for Zuma to quit

South Africa&#8217;s ruling African National Congress said on Tuesday it will brief media on Wednesday on decisions taken by senior officials after two days of meetings over a cabinet reshuffle by President Jacob Zuma.
The reshuffle has triggered divisions within the party.
S&amp;P Global Ratings cited the dismissal of respected former finance minister Pravin Gordhan as one reason for its downgrade of South Africa to &#8220;junk&#8221; in an unscheduled review on Monday, which sparked calls from several quarters for Zuma to quit.
(Reporting by James Macharia; editing by John Stonestreet)

South Africa’s ANC to give briefing on Wednesday after meetings on Zuma reshuffle

This article was first published last year as South Africa faced a possible downgrade by rating agencies
Current developments in South Africa are reminiscent of events in 1985. In that year South Africa experienced high costs from currency depreciation and adverse political developments. At the time the country faced increasing international sanctions and isolation, while the exchange rate of the rand remained under severe pressure, recording sharp falls in the international value of the rand.
South Africa’s financial stability was put under severe pressure after the infamous <a href="https://www.nelsonmandela.org/omalley/index.php/site/q/03lv01538/04lv01600/05lv01638/06lv01639.htm">Rubicon speech</a> of then State President P W Botha. Before the speech, high expectations were raised internationally about the announcement of major political changes in South Africa, but these expectations did not materialise. Following the speech, foreign banks refused to roll over South African short-term foreign debt, causing further depreciation of the exchange rate of the rand.
In 2016 South Africa might see a slow motion repeat of the events of 1985, culminating in a debt standstill. The following events, reminiscent of developments then, could unfold:
<ul>
<li>a continued depreciation of the rand, accelerated by the President’s inexplicable decision to <a href="http://mg.co.za/article/2015-12-09-nhlanhla-nene-removed-as-finance-minister">remove</a> his Finance Minister. The depreciation substantially increases the capital value of and interest repayments on foreign debt; and</li>
<li>a downgrading of South Africa’s credit rating to junk status that results in credit lines being withdrawn by foreign funders such as banks.</li>
</ul>
This time we can see trouble ahead and the government should act responsibly to avert a slow motion replay of 1985.
<h2>Debt standstill</h2>
Currency depreciation brings certain benefits to a country. The most obvious is the fact that exports become cheaper abroad and that demand for exports are therefore stimulated.
Unfortunately currency depreciation does not only bring benefits. Imported goods and services also become more expensive. More expensive imports put pressure on domestic inflation that can result in increases in interest rates. In economics it has often been said:
<blockquote>There is no free lunch, everything has a cost, even if then only an opportunity cost.</blockquote>
Currency depreciation also increases the capital value of foreign debt in domestic currency (where foreign debt are designated in foreign curreny) and the interest burden on such debt, as interest is also paid in foreign currency.
In short: in 1985 an unwillingness of banks abroad to make loans to South African entities (albeit for political reasons) plus the depreciation of the currency resulted in the inability of the country to repay its foreign debt.
The financial crisis culminated in the “Debt Standstill”, a moratorium on the repayment of most of South Africa’s private sector foreign debt, but excluded government debt. Debt repayments were managed by a Debt Standstill Committee and rescheduled over an extended time period, with the last of the rescheduled debt repaid in 2001.
<h2>The falling rand</h2>
In recent months the exchange rate of the rand has shown considerable depreciation. This is actually an acceleration of a long-term declining trend. The nominal effective exchange rate of the rand has lost around 50% of its value <a href="https://www.resbank.co.za/Research/Rates/Pages/SelectedHistoricalExchangeAndInterestRates.aspx">since 2010</a>.
The South African Reserve Bank <a href="https://www.resbank.co.za/Research/Rates/Pages/SelectedHistoricalExchangeAndInterestRates.aspx">describes</a> the nominal effective exchange rate as
<blockquote>… a weighted exchange rate of the rand measured against a basket of the currencies of South Africa’s twenty most important trading partners. The calculation is based on trade in and consumption of manufactured goods.</blockquote>
On this basis, measured against 20 currencies, the rand has therefore lost about half of its value.
In assessing the “Debt Standstill” with the benefit of hindsight, it is important to distinguish between South Africa’s foreign debt and South African government debt, as only private sector foreign debt was caught in the standstill.
The country’s foreign debt is all funds borrowed abroad by South Africans, including companies, other entities and private individuals and includes the government’s foreign borrowing. By the middle of 2015 South Africa’s foreign debt amounted to some R1.7 trillion, of which 46% was denominated in <a href="https://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/6999/10Statistical%20tables%20%E2%80%93%20International%20economic%20relations.pdf">foreign currency</a>.
South African government debt is the total of all funds borrowed by the government to balance its budget. South African government debt at present amounts to some <a href="http://www.treasury.gov.za/documents/mtbps/2015/mtbps/Technical%20annexure.pdf">R1.8 trillion</a>. Of this, some R190 billion (10%) is foreign debt, while the balance is borrowed from pension funds, banks and the like in South Africa.
South Africa’s foreign debt naturally includes the portion of the South African government <a href="http://www.treasury.gov.za/documents/mtbps/2015/mtbps/Technical%20annexure.pdf">debt borrowed abroad</a>, comprising about 11% of the country’s foreign debt. The balance is supplier credit, trade credit and the like. For instance: if a foreign supplier sells to a South African company and provides a six month credit line, the credit line is part of the country’s foreign debt for a period of six month.
This credit line has nothing to do with the South African government’s debt position, domestic or foreign. Government debt and the country’s foreign debt should not be confused.
Since 2007 South African foreign debt has shown a steady increase as percentage of both the gross domestic product (GDP) and total export earnings (TEE). At the same time interest payments on foreign debt as percentage of TEE have <a href="https://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/6999/10Statistical%20tables%20%E2%80%93%20International%20economic%20relations.pdf">increased</a>.
<h2>Possible junk status</h2>
South Africa’s foreign debt position (which should not be confused with the debt of the South African government) is vulnerable in three respects. First, currency depreciation raises the capital value of the funds borrowed abroad in foreign currency, hence increasing the repayment burden on South African borrowers. Foreign debt as percentage of GDP increases owing to currency depreciation.
Secondly, interest payments on foreign debt increase owing to currency depreciation. This will be exacerbated by an international normalisation of interest rates. The result might be a raising TEE if the combined result of higher international rates and currency depreciation exceeds the increase in exports owing to currency depreciation.
These two factors were present in 1985, but were exacerbated at that time by political considerations, namely banks refusing to lend more money to South Africa after the Rubicon speech. The last element for a repeat of 1985 in slow motion might be triggered by another event some 30 years later: a credit risk downgrading to junk status of South Africa by international rating agencies.
If South Africa’s international risk rating is downgraded to junk status, international banks and other companies will be much more reluctant to make loans to South African entities, or will even withdraw existing credit lines.
This might be the seismic event similar to the withdrawal of international credit lines for political reasons in 1985, culminating in a debt standstill. The South African government should introduce in a timely fashion policies to avert a repetition on the events of 1985.

South Africa is on a cliff edge – just as it was in 1985

South Africa&#8217;s rand, bonds and banking shares tumbled sharply on Tuesday after S&amp;P Global Ratings cut the country&#8217;s credit rating to junk in response to President Jacob Zuma&#8217;s move to sack its respected finance minister.
Zuma&#8217;s cabinet reshuffle has triggered public criticism from within the ruling African National Congress (ANC) and pressure is likely to mount on the president after the credit agency handed South Africa its first downgrade since 2000.
http://cnbc.africa/news/southern-africa/2017/04/03/rating-downgrade-risks-triggering-series-economic-setbacks-south-africa-irr/
New Finance Minister Malusi Gigaba is due to hold a news conference later in the day.
Gigaba said on Monday he would pursue &#8220;tough and unpopular choices&#8221; to oversee a redistribution of wealth to the black majority, a stance echoing recent comments by Zuma. No details of the changes have been made public yet.
The one-notch downgrade to BB+, S&amp;P&#8217;s highest non-investment grade, will almost certainly force Africa&#8217;s most advanced economy to pay more to borrow its from international markets and possibly and may fall off global investors&#8217; radar screens.
&#8220;This sovereign downgrade will lead to a steep erosion of already poor levels of investor confidence,&#8221; Cas Coovadia, head of the banking industry lobby group said.
&#8220;Negative investor confidence will directly undermine an economy already struggling to achieve the levels of growth needed to meaningfully create jobs or lift our population out of poverty.&#8221;
http://cnbc.africa/trending/cabinet-reshuffle-17/2017/04/03/stand-rand-say-south-africas-currency-will-weather-storm/
Moody&#8217;s also said late on Monday that it was placing South Africa on review for downgrade, and that it would assess the likelihood of changes in key areas of financial and macro-economic policymaking following Zuma&#8217;s cabinet changes.
The rand weakened as much as 1.9 percent before recovering to trade 1.2 percent lower at 13.8400 per dollar.
The Johannesburg Securities Exchange&#8217;s banking index slumped as much as 4.2 percent, while the yield for the benchmark government bond due in 2026 rose 16 basis points to 9.140 percent.
(Reporting by Joe Brock and Tiisetso Motsoeneng; Editing by James Macharia)

South African rand, bonds & banking shares fall sharply after downgrade

<div class="inline-player"></div>
<div class="group">
		
				
		
<a href="http://www.cnbc.com/south-africa/" target="_self">South Africa</a> has 11 official languages, so there are plenty of ways to characterize the recent moves with the country&#8217;s currency. However you say it, though, things look bad for the rand — at least on the surface.
Last week was <a class="inline_quotes" href="http://data.cnbc.com/quotes/ZAR%3D" target="_self" data-gdsid="610789" data-inline-quote-symbol="ZAR=">ZAR&#8217;s</a> worst since 2015, with the rand weakening several percent against the dollar in the same month that it hit its best level versus the greenback in 20 months. All of this <a class="inline_asset" title="http://www.cnbc.com/id/104380257" href="http://www.cnbc.com/id/104380257" target="_self">in the wake</a> of President Jacob Zuma&#8217;s decision to fire his highly-respected finance minister, Pravin Gordhan. The ruling African National Congress is divided. Demonstrations are planned all week, culminating in a large protest in Johannesburg on Friday. And the speaker of South Africa&#8217;s parliament is considering an opposition request to hold a no-confidence vote on Zuma. Sure, it&#8217;s a real mess, but what does it mean for the rand?
<blockquote>&#8220;I would say, potentially, there could be some more weakening in the rand in the short term,&#8221; said Saktiandi Supaat, Global FX Strategy at Maybank. &#8220;Maybe another 5, 10, 20 percent potentially. It could actually move further than that if developments start to worsen.&#8221;</blockquote>
The political upheaval in South Africa is getting in the way of a strong recovery for the rand. It hit a high against the dollar in 2011, but then slowly started falling, hitting record lows at the end of 2015 and beginning of 2016 as commodity price weakness and market turbulence in China weighed. But investors shouldn&#8217;t abandon the rand, according to Jim Rickards, co-founder and chief global strategist at Meraglim.
		
				
		
</div>
&#8220;I think most of the most of the bad news is out,&#8221; he said in an <a href="http://video.cnbc.com/gallery/?video=3000606823">interview</a> with CNBC&#8217;s &#8220;Street Signs.&#8221;
&#8220;The rand is right in the middle of a five-year trading range. It&#8217;s gone as high as 8 (vs. the dollar) and as low as 17,&#8221; he added.
Rickards indicated that global capital flows, the price of gold and the U.S. Federal Reserve policy have a stronger influence on the South African currency than what he called &#8220;short-term stories.&#8221;
&#8220;How much worse can this get? [Zuma] already did the reshuffling. He fired a fairly competent finance minister. It looks like he&#8217;ll survive the no-confidence vote,&#8221; said Rickards. &#8220;But if he doesn&#8217;t survive and you get better leadership, then that&#8217;s actually very bullish for the rand. It looks like a bottom, it looks like a good entry point.&#8221;
Maybank&#8217;s Saktiandi Supaat agreed.
&#8220;My sense is I think once it stabilizes, it&#8217;s actually a good opportunity to get back on the rand again.&#8221;

They stand with the rand: Why some say South Africa’s currency will weather the storm

There is a lot of brave talk about standing up to President Jacob Zuma after the <a href="http://ewn.co.za/2017/03/31/gordhan-rubbishes-zuma-s-reasons-for-firing-him">dismissal</a> of Finance Minister Pravin Gordhan amid a wider cabinet reshuffle which has been widely condemned as disastrous for South Africa. <img loading="lazy" decoding="async" src="https://counter.theconversation.edu.au/content/75587/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" />
Predictions that the country has reached “<a href="https://theconversation.com/stakes-for-south-africas-democracy-are-high-as-zuma-plunges-the-knife-75550">a turning point</a>”, is facing a <a href="https://theconversation.com/firing-of-south-africas-finance-minister-puts-the-public-purse-in-zumas-hands-75525">ratings downgrade</a> and plummeting investment, rising debt and negative growth vie with warnings that South Africa is headed towards becoming a “failed state”.
Meanwhile, calls are being made to all South Africans to <a href="https://www.biznews.com/leadership/2017/03/31/comment-zumas-night-of-long-knives-gordhan-out-gupta-associates-in/">voice their displeasure</a>, threats to <a href="http://www.news24.com/SouthAfrica/News/we-will-occupy-treasury-vow-save-sa-supporters-20170331">occupy the National Treasury</a>, and the certainty of numerous <a href="http://www.you.co.za/news/in-pictures-protests-in-pretoria-cape-town-after-zumas-shock-cabinet-reshuffle/">protest marches</a> around the country.
Yet the real action will take place in parliament. And South Africans can take it for granted that Zuma reckons that he can ride out the storm, survive the rest of his term, and secure the election of a like-minded crony to replace him.
So what danger is Zuma facing in parliament?
There are two options for challenging Zuma in parliament. The first, proposed by the main opposition party, the Democratic Alliance (DA), is a <a href="http://ewn.co.za/2017/03/31/malema-eff-to-support-da-s-motion-of-no-confidence-in-zuma">vote of no confidence in Zuma</a>; the second, favoured by the smaller Economic Freedom Fighters (EFF), is <a href="http://ewn.co.za/2017/03/30/malema-to-aproach-concourt-in-bid-to-impeach-zuma">impeachment</a>.
To consider the prospects for these, it is necessary to turn to the <a href="http://www.gov.za/DOCUMENTS/CONSTITUTION/constitution-republic-south-africa-1996-1">constitution</a>.
<h2>The odds in parliament</h2>
The opposition’s best option is to seek a motion of no confidence in the President (rather than in the cabinet, the other option provided for by the constitution). The relevant paragraph in the constitution reads as follows:
<blockquote>If the National Assembly, by a vote supported by the majority of its members, passes a motion of no-confidence in the President, the President and the other members of the Cabinet and any Deputy Ministers must resign. <a href="http://www.gov.za/documents/constitution-republic-south-africa-1996-chapter-5-president-and-national-executive">(Chaper 5, Paragraph 102 (2))</a>.</blockquote>
Were this motion to pass (and a strict reading of that paragraph implies a majority of all MPs, not simply of those voting), South Africa would be in uncharted territory. There might be various outcomes. One might be that the ANC, as the majority party, would present another candidate to Parliament for election as President for the rest of the electoral term ending in 2019.
Or would it lead to an early general election? Or third, would passage of such a motion impose an absolute bar on Zuma returning to the presidency were he to hang on to the leadership of the ANC, twist arms, and return in triumph to Parliament to win reelection?
Frankly, nobody knows, and South Africans would have to sit through a roller coaster while these alternatives worked their way out.
What are the chances that the country is going to find out? This depends, obviously, on whether the DA can muster enough support to secure a majority. The ANC has 249 seats to the opposition parties’ 151. So, at the minimum, the DA has to pick up 50 seats from the ANC to secure a majority. But given that Zuma is likely to be able to pick up a handful of supportive votes from the smaller parties favouring an Africanist agenda, it is more likely that the DA would require at least 55 (even 60) ANC MPs to vote for its motion (abstention would not be enough).
The requirements for the EFF to win an impeachment motion are even more daunting. For a start, they would require a two-thirds rather than a bare majority. They would require 264 votes, which in practice would mean, let’s say, at least 70 ANC MPs to vote against Zuma.
To make the impeachment case, they would further need to justify the grounds for removing Zuma from office by convincing the National Assembly that Zuma has committed “a serious violation of the law” or is “guilty of misconduct”. (I discount the third ground for removal of a President from office, “inability to perform the functions of office”).
It might seem obvious to those who want to see the back of Zuma that he is guilty of both violating the constitution and of misconduct. But given the compromised standing of virtually all sitting ANC MPs in allowing Zuma to get away with <a href="http://city-press.news24.com/News/constitutional-courts-damning-judgment-zuma-violated-his-oath-of-office-20160331">blatant abuse of the constitution</a>, this would require that any dissident 70 or more of them would have to eat a good dose of humble pie. And in public, too.
So realistically it would seem that a simple vote of no confidence in the president is the easiest to pursue and the most likely to succeed. But what are the chances of success, given that Zuma <a>has survived</a> a number of such motions before?
It is likely that the DA would be able to secure virtually all the votes of the combined opposition, save perhaps up to five MPs from smaller parties who might succumb to Zuma’s blandishments. The commitment and energy of the EFF would be invaluable. Fortunately, they have said they will <a href="http://ewn.co.za/2017/03/31/malema-eff-to-support-da-s-motion-of-no-confidence-in-zuma">back the DA motion</a>.
But what about potentially dissident ANC MPs? ANC party “elders” often repeat the mantra that the ANC under Zuma has been led astray from the <a href="http://www.timeslive.co.za/politics/2017/03/28/We-cant-keep-quiet-ANC-stalwarts">true path of virtue</a>, and that there is need for a return to the old ways which underpinned the party during the struggle for liberation. Does this imply that the “real ANC” is now ready to stand up?
Alas, don’t hold your breath.
<h2>Alternative leadership isn’t in sight</h2>
Mmusi Maimane, leader of the DA, <a href="http://www.702.co.za/articles/250556/maimane-if-no-confidence-vote-succeeds-zuma-s-new-cabinet-nullified">says</a> he’s already been contacted by dissident ANC MPs with promises to support the DA motion. That is good and well – and promising. Yet there is a long way to go, and the stakes for the ANC and individual MPs themselves are extraordinarily high. If the 55 or 60 ANC MPs needed for a majority were to support the DA motion, it would be the signal for total war within the party. Accordingly, it would have to be assumed that they have the appetite for it.
Are there enough of them to take that risk, or will they play for safety by either simply abstaining, or arguing that it is better to keep the fight within the party, and postpone the real battle to the ANC’s <a href="http://www.news24.com/SouthAfrica/News/anc-tightens-leadership-nomination-process-ahead-of-elective-conference-20170130">congress in December</a>?Given the likelihood that Zuma controls the party machinery more than they do, they would run a severe risk of losing their places on the party’s list at the next election. This in turn would force them to consider whether to align themselves more openly with the DA or the EFF, albeit perhaps, in some new political combination.
These dissenters will need the assurance of good leadership. Perhaps we will see this emerging over the next few days. Yet the signs to date are not good. Yes, Deputy President Cyril Ramaphosa has publicly stated his <a href="http://www.news24.com/SouthAfrica/News/ramaphosa-upset-but-wont-resign-20170331">disagreement with Gordhan’s dismissal</a>, yet he did so in tones highly respectful of the president’s constitutional authority.
http://cnbc.africa/news/southern-africa/2017/03/30/south-africas-zuma-meets-top-anc-officials-amid-speculation-gordhan-sacked/
Meanwhile, those ministers disagreeing with Zuma have discounted the option of resigning in mass. This is justified by the need to prevent Zuma stuffing his cabinet with even more of his cronies. However, if they are to justify their decision, we should expect that they should be vocal rather than keeping their heads down. Will they take that further step of moving into outright rebellion? Will the Deputy President be bold enough to lead the charge?
I fear much talk but no action.
Unless, perhaps, Gordhan, the popular hero of the hour, provides one further great service to the nation.
<a href="https://theconversation.com/profiles/roger-southall-296862">Roger Southall</a>, Professor of Sociology, <a href="http://theconversation.com/institutions/university-of-the-witwatersrand-894">University of the Witwatersrand</a>
This article was originally published on <a href="http://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/zumas-critics-within-the-anc-are-vocal-but-will-they-act-75587">original article</a>.

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