Global Insight Perspective | |
Significance | Among those who have quit the government are the ministers of defence, intelligence, public enterprises, and public services as well as the local government and housing minister. |
Implications | As important as the other ministers were, it is the departure of the highly respected Finance Minister Trevor Manuel that led to the negative market reaction, with both the local currency, the rand, and the stock market recording losses following the news. |
Outlook | Nevertheless, the markets are likely to respond more positively when they reopen tomorrow (they are closed today due to a public holiday) following confirmation from Manuel that he is willing to serve in a post-Mbeki administration, which is likely to see him being restored to his old job by caretaker President Kgalema Motlanthe as soon as he takes over at the helm. |
Following President Thabo Mbeki’s forced resignation from office earlier in the week, which will be formalised tomorrow, a number of senior government ministers have decided to follow suit, causing panic in the country’s financial markets amid fears that South Africa is entering a period of political instability (see South Africa: 22 September 2008: South Africa's President Forced Out, Interim Successor Named). Mbeki was forced to resign as South Africa's president, some seven months earlier than the expiration of his second five-year term in office, following the ruling African National Congress (ANC)'s unprecedented decision to recall him from office. That was in turn prompted by the accusation by a High Court judge that he interfered in the corruption trial of his one-time deputy, and now political rival, Jacob Zuma, the new ANC head and most likely long-term successor as the country's president (see South Africa: 15 September 2008: South Africa's Ruling Party Chief Set for Presidency as Court Throws Out Corruption Charges).
According to a statement from the president’s office, the cabinet members who submitted their resignations are:
- Deputy President Phumzile Mlambo-Ngcuka;
- Minister of Defence Mosiuoa Lekota;
- Minister of Finance Trevor Manuel;
- Minister in the Presidency Essop Pahad;
- Minister of Intelligence Ronnie Kasrils;
- Minister of Correctional Services Ngconde Balfour;
- Minister of Public Enterprises Alec Erwin;
- Minister of Science and Technology Mosibudi Mangena;
- Minister of Public Works Thoko Didiza;
- Minister of Provincial and Local Government Sydney Mufamadi;
- Minister of Public Service and Administration Geraldine Fraser-Moleketi;
- Deputy Minister of Foreign Affairs Aziz Pahad;
- Deputy Minister of Finance Jabu Moleketi; and
- Deputy Minister of Correctional Services Loretta Jacobus.
"The resignations will be effective from the day that the president's resignation takes effect [Thursday]," the statement added.
Big Loss
News of the resignations, especially that of the highly respected Finance Minister Trevor Manuel, sparked some panic in the country’s financial markets. The rand fell by more than 2.5%, bonds fell sharply, and the top-40 index at the country’s bourse—the JSE Securities Exchange—ending the day more than 4% down. First appointed to the key post back in 1996, the outgoing finance chief is among the most well-respected treasurers in the world, widely admired among the business community for his skilled handling of the country's economy and of overseeing the smooth transition from the Apartheid-era system to an open, market-led system. Manuel is also personally credited with steering South Africa to macro-economic stability in the decade or so he has been at the helm, when the country achieved record growth, and as such his departure was seen as very damaging.
Nevertheless, just as the markets were beginning to contemplate life without him, Manuel indicated that his resignation might be a temporary one, and that he may return to the government. Treasury spokeswoman Thoraya Pandy said Manuel had “resigned as a member of the cabinet and felt duty-bound to do so as he served at the pleasure of the president, and President Mbeki had resigned…However, the minister has indicated a strong willingness to assist and to serve the new administration in whatever capacity they may ask of him.”
Outlook and Implications
Most of the ministers who tended their resignations, such as Manuel, claimed that they did so in order to allow the new caretaker President Kgalema Motlanthe to choose his own team (see South Africa: 23 September 2008: Caretaker President Prepares to Take the Reins in South Africa). Despite giving the same reasons, there are also those—such as Deputy President Mlambo-Ngcuka and Defence Minister Mosiuoa Lekota—who were strongly allied with the outgoing Mbeki and may have felt this was the right time to go, fearing marginalisation now that the Zuma-led faction is firmly in control of the ANC as well as the government. Others such as Erwin, who announced months ago that they would not serve in the government beyond the next election, only brought their departure forward by a matter of months.
However, the manner in which their resignations were announced, and the ensuing panic within the country’s financial markets, suggests that the business community is still uncertain on how to react to the events of the past few days. This is largely due to concerns that the ascendency of the Zuma faction within the ANC and the government could herald a shift in economic policy, especially if highly respected individuals such as Manuel feel they could no longer serve in the new administration. Zuma, who has been expected to succeed Mbeki at the next election, moved to reassure the markets by insisting that the resignations should not be unduly alarming. "The [cabinet] resignations do not pose a crisis and there is no need to panic," the ANC chief said, during a speech in Secunda, in the north-east province of Mpumalanga. "The situation will be managed carefully to avoid any disruption of services," Zuma added. The markets also responded more positively later, with the rand recouping some of its earlier losses, following news that Manuel would be willing to serve in a new cabinet. This suggests that there will be a further rebound when the markets reopen tomorrow after being closed off due to a public holiday today. Tomorrow is also the day that Motlanthe is due to begin his tenure, with one of his first tasks likely being the restoration of Manuel to his old job.