Africa Confidential Briefing | SOUTH AFRICA: Reshuffle could become reality as Zuma recalls Finance Minister from investment tourTuesday, March 28, 2017
by Business Council for Africa
By Patrick Smith, Editor of Africa Confidential
We start in Pretoria, from where South Africa's Finance Minister Pravin Gordhan has just been summoned to return from London, sparking more speculation that President Jacob Zuma is about to sack him. And then to Zimbabwe which is, despite the political ructions in South Africa, considering adopting the rand as its currency. And in neighbouring Zambia, the plumbers of the International Monetary Fund are due in Lusaka to start negotiations on a new stabilisation programme. Financial matters are also to the fore in Ghana, where the Governor of the central bank has to make an important decision on interest rates but faces growing opposition from officials in the new government. And finally to the Confederation of African Football, where the compelling defeat of its long-time President, Issa Hayatou, is likely to presage reform and more opportunities for the continent's young footballing talents.
SOUTH AFRICA: Reshuffle could become reality as Zuma recalls Finance Minister from investment tour
A cabinet reshuffle could be in preparation following the confirmation by a Treasury official on 27 March that President Zuma has rescinded permission for Finance Minister Gordhan to host investment roadshows in Europe and the United States. It is an open secret in the top echelons of the governing African National Congress that Zuma wants to push Gordhan and his deputy, Mcebisi Jonas, out from the Treasury. Treasury Director General Lungiza Fuzile, also seen as a Gordhan ally, has also been ordered to return from London.
Political insiders have been predicting that Zuma might choose the second half of March for his long-mooted reshuffle. Various pieces in the jigsaw are now in place. Zuma's close ally Brian Molefe, the disgraced Chief Executive Officer of state utility Eskom, has been sworn in as an ANC member of parliament. Many expect him to be given a top economic ministry to run.
Zuma's ex-wife and favoured candidate for the ANC presidency in party elections at the end of this year, Nkosazana Dlamini-Zuma, finally left her position as Chairwoman of the African Union Commission in Addis Ababa on 14 March. Dlamini-Zuma is also expected to be given a top ministry in an effort to boost her credentials in what is increasingly looking to be a very bruising competition with Deputy President Cyril Ramaphosa for the top job in the ANC.
ZIMBABWE: Adopt the rand and drop the dollar, says top bank official
Whatever the political ructions in South Africa's Treasury department, neighbouring Zimbabwe still sees the country – especially its currency, the rand – as an anchor in uncertain times. That seems to have informed the call from Kupukile Mlambo, Deputy Governor of Zimbabwe's Reserve Bank, for his country to adopt the rand rather than the US dollar as its main currency.
Mlambo's argument is economically convincing. Most of Zimbabwe's imports come through South Africa and are originally priced in rand. But because of its weakness against the US dollar, the price of these imports rises sharply when their prices are converted into US dollars.
Politically, adopting the rand could prove more problematic for President Robert Mugabe's government. It would mean that South Africa's economic policies – on interest rates, inflation and money supply – would directly affect policy-making in Zimbabwe.
For now, that might not seem to matter much as the South African government does not appear to be very exercised about Zimbabwe's internal politics. But should that stance change with new leadership at the top of the governing ANC, South Africa's influence on its northern neighbour could prove decisive.
ZAMBIA: Slow growth and ballooning debts prompt Lungu to call in the IMF
After the high-octane spending spree in the run-up to elections last August, it had seemed likely that President Edgar Lungu's government would bring in the IMF to help stabilise the economy. It was his plan to delay bringing in the Fund that allowed him to turn on the spending taps and tell electors that his government represented high economic growth and investment. His opponent Hakainde Hichilema, the businessman who leads the United Party for National Development, argued that many of Lungu's pre-election contracts were terribly over-priced or awarded to bogus companies. If the IMF demands, as many activists hope, forensic audits of state procurement over the last couple of years, it may be possible to work out whether Lungu or Hichilema is right.
Lungu's government says it will reach agreement with the IMF by mid-year, which will involve reining in state spending and cutting the budget deficit. Despite a boom in the price of copper and cobalt, among Zambia's main exports, the Fund forecasts that economic growth will rise about half a point to 3.5% this year.
GHANA: Central bank may cut rates as Governor fights off pressure over job
Although many senior officials in President Nana Addo Akufo-Addo's government are keen to see the exit of Central bank Governor Abdul-Nashiru Issahaku, regarded as a close ally of defeated President John Mahama, he is showing considerable tenacity as he hangs on to his job.
According to the constitution, Issahaku has tenure and could be dismissed only by a special vote in Parliament or if the Attorney General authorised criminal charges against him. For now, it seems the new government's economic departments have chosen to work closely with the Governor on key policy matters.
A case in point is this week's decision on interest rates. Local banking analysts argue that Governor Issahaku should cut rates on 27 March by at least 1%. The cedi has gained over 6% against the dollar since Finance Minister Ken Ofori-Atta's well received budget on 2 March, which set out plans to promote private sector growth, cut some taxes and cap state spending.
But Governor Issahaku will remain haunted by what is known at the Bank of Ghana as the 'Sibton Switch Affair'. That is the award of a contract, which would have been worth US$1.4 billion over 20 years, to a little known local company to set up an 'inter-operable’ electronic payments system. That means that the system would allow people to make transfers on their mobile phones and on the internet to all banks participating in the scheme.
The size of the contract award astonished the incoming government, particularly when it discovered the competing bids, from more established local companies, were priced at $8-$15 million to provide essentially the same service. Although we understand the Sibton Switch contract has now been suspended, questions are being asked about Issahaku's role and why he didn't act sooner.
AFRICAN FOOTBALL: What changes after the fall of Hayatou?
The defeat of Issa Hayatou, the long-time head of the Confederation of African Football, at the elections in Addis Ababa last week was something of a metaphor for the continent's politics and it presages sweeping changes in Africa's most important sport. Hayatou was also seen as a key ally of the disgraced President of the Fédération Internationale de Football Association, Sepp Blatter, who has now been barred from holding any office in FIFA after dominating the organisation for three decades.
Together, Blatter and Hayatou reinforced each other's dominance of international football organisations and their courting of political support in Africa as a key part of their modus operandi. With Blatter and now Hayatou out of the way, that era has finally gone.
The victory of the head of Madagascar's Football Association, Ahmad (who is known by this single name), was convincing enough – he won by 34 votes to 20 – to represent a mandate for reform of the financing of the continent's national soccer organisations.
It could also mean an end to the weight of corruption that has stolen resources from much-needed efforts to promote training and development on the continent of some of its talented youth, many of whom are snapped up by European and Asian football teams.
That has led to the phenomenon known as 'football trafficking', which apart from the suffering it may inflict on individual players, also undermines efforts to establish a much stronger culture of sporting skills development within Africa.
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