ANC unity as the curious scenario to emerge from Jacob Zuma's axing of Pravin Gordhan - 26 June 2017

In the three months since the axing of Pravin Gordhan, and contrary to much analysis, African National Congress (ANC) unity has become a scenario that should be taken seriously.

Three months ago we argued on CNBC that two factors explained Mr Zuma’s allegedly irrational decision to fire Pravin Gordhan:

  • The first is that the decisions were not irrational, but part of a calculated power-play designed to further entrench the Zuma-aligned faction of the African National Congress (ANC).
  • The second is that Mr Zuma took the decision to fire Pravin Gordhan under duress – and specifically Russian duress.

We think that subsequent events show that there was a great measure of truth to both explanations and that contrary to what many analysts predict Mr Zuma’s actions may have triggered an internal ‘Stalingrad’ environment within the ANC that will serve (in the short term at least) more to unite than to divide the party. Indeed the pursuit of unity is now our most likely scenario for the ANC into the end of this year and such unity may go as far as the Zuma-camp attempting to strike a deal with Cyril Ramaphosa.

For those not familiar with our original CNBC analysis this is the gist of it:

“In gaining control over the treasury the Zuma-aligned faction of the ANC has strengthened its position within the tri-partite alliance. Some analysts have suggested that Zuma may be recalled through a vote of no confidence in Parliament, but we do not think that such a move could succeed. Mr Zuma is a consummate chess player and has accounted for this eventuality, and the analysts who say Zuma will be removed by Parliament are likely to be wrong. We expect the ANC to put its immediate emphasis on unity, which means the party is unlikely to give its MPs the go-ahead for such a divisive move. Even if a dissident group did break away and join the opposition in voting Zuma out, this would immediately see the Zuma-aligned speaker of parliament, Baleka Mbete, take over the functions of the President.  Zuma would remain leader of the ANC and his party supporters would quickly purge those dissident MPs who voted him out.

The opposition that has grown in civil society to Mr Zuma has, still, at best limited influence on internal ANC or parliamentary processes. We still think this opposition will come to nothing for the time being. If it were to surprise and come to threaten the President, we expect the state security apparatus to swiftly nip that in the bud.

Business leaders who took such an aggressive partisan stance against the Zuma-aligned ANC are unlikely to stay the course. They will change tack and rather seek to influence the policies of the new-look cabinet. We also think that the government will try to preserve existing fiscal policy and confidence in the economy, and that dramatic short-term reversals in policy are unlikely. Rather, we will see a further deepening of existing policies, particularly those aimed at enriching a small politically connected elite while, at the same time, the government tries to rein in the budget deficit and get growth rates up – probably an impossible contradiction.

Overall, the evidence to date seems to confirm that Gordhan’s axing was aimed at eliminating the logjam that he caused through standing in the way of a number of nefarious business and other transactions. Those transactions may now go ahead. However, this will not necessarily lead to an immediate and fundamental change in macro-economic policy direction.

The second explanation for the government’s decisions is that Zuma took hurried and panicked decisions under duress. Understanding this explanation requires some context.

Work published J Peter Pham, head of the Africa Centre at the Atlantic Council in Washington, argues that the 1990s saw significant Russian disengagement from Africa as Russian policy makers blamed their economic ills in part on the costs of their Cold War interventions in developing economies, including those in Africa. Pham argues that this began to change when Vladimir Putin came to power in 1999, and that Mr Putin moved to reengage with Africa in the pursuit of two strategic objectives.

The first was to capture African governments as a pool of diplomatic support for Russian interests on global fora such as the United Nations. African countries make up the single biggest geographic voting bloc across a range of global security, human rights, and trade and investment organisations. Being able to wield that voting bloc in pursuit of its strategic goals would greatly increase Russia’s global leverage. The chief executive of the South African Institute of International Affairs and former IRR staffer, Elizabeth Sidiropoulos, has been quoted in the media as saying that for Russia to realign global power balances with Western democracies, “it needed to be present in all geographies — and, of course, Africa is an increasingly important one”.

The second was to capture African energy resources and policy as a means of denying European countries any future African energy alternative to their dependency on Russian gas supplies. According to the energy consultancy, Wood Mackenzie, Russian exports meet approximately a third of European Union gas demand. According to The Economist roughly a third of German gas consumption is supplied by Russia, while countries such as Lithuania, Finland, Hungary, and Bulgaria are wholly dependent on Russian gas. In 2016 the New York Times quoted the Lithuanian foreign minister as saying that “energy was always used as a tool by Russia for blackmailing and leverage”.

Over the past decade-and-a-half, Russian energy firms became the spear point of Russia’s engagement with Africa. Research shows that after Mr Putin came to power Russian firms made considerable (occasionally multi-billion dollar) oil, gas, and nuclear power investments in countries ranging from Algeria to Nigeria, Ghana, and Egypt. The firms Gazprom, Lukoil, and Rosatom all made investments. Considerable non-energy investments were made in the resources sector in countries from Ivory Coast and Ghana to Namibia, Angola, and the Democratic Republic of the Congo. The volume of Russian trade with Africa increased considerably in the decade after Mr Putin came to power (sources we have consulted suggest five-fold and even greater increases).

In the case of both Egypt and now South Africa, the major investor is the Russian nuclear firm Rosatom. The firm is on the verge of developing nuclear power stations in Egypt. It is speculated that a South African nuclear agreement could be worth more than a trillion rand – more than ten times that of the controversial arms deal. In anticipation, a number of companies with close ties to the Gupta and Zuma families positioned themselves to take advantage of the pending nuclear agreement. The purchase of the Rietkuil uranium mine was one such deal (the details have been well analysed in the media).

Informed speculation is that past cabinet reshuffles were made to facilitate such deals and to get control of the Public Investment Corporation (which invests government pension funds) in order to finance some of these deals. As the nuclear agreement may be unaffordable for South Africa, it would effectively mortgage South Africa’s economy to Moscow. This would allow Russia quite extraordinary strategic influence within southern Africa, thereby achieving Russia’s strategic objectives in the region.

The theory of the Russian connection goes further. It has been alleged that Nhlanhla Nene was fired as finance minister in December of 2015 because of his refusal to support the Rosatom deal. Similar allegations are doing the rounds about the recent firing of Pravin Gordhan. One is that Mr Gordhan might have stated quite plainly on his ill-fated London trip that the government would not support any Rosatom deal. The allegation is made that a phone call was subsequently placed from a Russian observer in London to Moscow, which led to a second call from Moscow to highly placed individuals in the South African government with the instruction that Mr Gordhan be immediately withdrawn. We have been able to establish that this could almost certainly not have happened in the manner it was reported.”

Our inclination is still that the events of past months were a sophisticated power-play by Zuma-aligned factions in the ANC. In forcing an internal ‘Stalingrad’ the events have left those factions in a strong bargaining position to strike a deal with factions aligned to Cyril Ramaphosa and we think this is what the ANC may now try and do. Therefore, despite the level and ferocity of recent internal power struggles, our most likely scenario for the ANC is that it will try to unite around its pending policy and leadership conferences. Reaching and maintaining even the façade of unity will improve its 2019 electoral prospects considerably.

Frans Cronje is a scenario planner and CEO of South Africa’s leading think tank – the IRR