Banks Worried Zuma Trying to Erode South Africa's Oversight

(Bloomberg) -- South African banks are concerned President Jacob Zuma's firing of his finance minister is part of an effort to weaken institutions aimed at avoiding money laundering and corruption.

Zuma dismissed Pravin Gordhan and eight other cabinet members in a move the Banking Association of South Africa said creates political uncertainty and threatens the nation's investment grade credit rating. Zuma replaced Gordhan, with whom he feuded over state finances, with Home Affairs Minister Malusi Gigaba, who has no financial or business experience.

“This is part of the executive's attempt at eroding oversight and weakening important institutions,” the association, which represents lenders such as Standard Bank Group Ltd. FirstRand Ltd and Barclays Africa Group Ltd., said in an emailed response to questions on Friday. “This trend includes political interference in the sector and we will develop appropriate responses.”

The association's board is setting up a special meeting to deal with the issue and will also seek talks with Gigaba to discuss the importance of maintaining and protecting the soundness of the banking industry, it said. Zuma's actions have thrown the country into turmoil just as leaders from business, labor and the government were making progress in winning back investor confidence since Zuma first tried to install a more pliant finance minister in December 2015, the association said.

Family Friends

Banks have become targets of Zuma and his supporters after they closed accounts of companies tied to the president's friends, the Gupta family, who are also in business with one of his sons. Gordhan had accused the Guptas of undermining his ministry by badgering him to intervene by calling on him to force banks into reopening the accounts.

The Guptas have said their businesses risk collapsing without bank accounts. Zuma and the Guptas have denied wrongdoing. The lenders said separately that they closed the accounts for fear of damage to their reputations and that they need to take into account laws on money laundering and corruption.

Gordhan's ouster marked the end of a stormy relationship that began almost as soon as Zuma named him as finance minister in December 2015, four days after the president triggered a sell-off in the rand by replacing the respected Nhlanhla Nene with a little-known lawmaker. Zuma has been criticized by opposition parties of using state institutions such as the crack police investigative unit, the Hawks, and the intelligence services to fight political opponents.

“We have no choice but to say this reshuffle is not in the best interests of the country,” the association said. “We are also left with little choice but to question the motives behind this action.”

To contact the reporter on this story: Colin McClelland in Johannesburg at cmcclelland1@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Vernon Wessels, John Viljoen