ANC-allied union calls for South Africa's Zuma to quit

PRETORIA: South Africa's biggest trade union called on President Jacob Zuma on Tuesday to quit after his cabinet reshuffle cost the country one of its investment-grade credit ratings and deepened splits within the ruling African National Congress (ANC).

The call from Cosatu came moments after Zuma made his first public remarks about Thursday's sacking of respected finance minister Pravin Gordhan, which rating agency Standard & Poor's cited as a reason for its downgrade of South Africa to "junk".

In remarks echoed by new finance minister Malusi Gigaba, Zuma said fiscal policies would not change and that people should remain calm after the rating cut.

He also urged his cabinet to reach out and reassure international investors following the dismissal of Gordhan, a totem of policymaking stability for many, whose departure has rocked the rand currency and other local assets.

But the union, allied to Zuma's ANC, said it no longer believed in his ability to lead, and that it wanted to restructure its alliance with the party.

"The time has arrived for him (Zuma) to step down and allow the country to be led forward by a new collective at a government level. We no longer believe in his leadership abilities," Cosatu said in a statement.

Defending the reshuffle, Zuma said he expected the addition of "many young ministers" to "add renewed energy into Cabinet and the executive".

"With regards to the finance portfolio, we reiterate that while the political leadership has changed, government's overall policy orientation remains the same," Zuma said.

Gigaba later told a news briefing the rating cut, which is set to push up South Africa's borrowing costs, would force even greater government focus on growing the economy. He said he would address issues raised by S&P.

Gordhan's sacking has outraged opponents and some political allies of Zuma, undermining his authority as president and threatening to split the ANC, which has governed South Africa since the end of apartheid in 1994.

The rand, which fell as much as 1.9 percent at the start of trading on Tuesday, turned 1 percent firmer over mounting calls for Zuma to step down. Bonds also firmed.

After reaching a 20-month high, the currency has fallen about 13 percent against the dollar since Monday last week, when Zuma ordered Gordhan to return home "immediately" from an investor roadshow abroad.

After thanking the ex-finance minister for his service, Zuma said the government remained committed to measured fiscal consolidation that stabilises rising public debt. But it also aims to radically transform the economy "to include the black majority in the ownership and control".

Zuma urged calm, saying public disagreements within the government "demoralise our people and create confusion".

South Africa's Communist Party, another long-time ally of the ANC, demanded on Friday that Zuma step down. Both it and Cosatu said they would preserve ties with the party.

"Cosatu's now the second core alliance partner to call on President Zuma to resign," said political analyst Daniel Silke.

"It's a deep dagger."

'SETBACK'

Gigaba acknowledged that S&P's downgrade to BB+ was a setback but joked that he did not take it personally.

"Despite our current challenges, now is not a time for despondency," he said, noting that local currency debt, which makes up about 90 percent of 2.2 trillion rand ($161 billion) South Africa owes, is still rated investment-grade.

Gigaba reiterated plans to transform the economy to improve the fortunes of black people.

Rating agency Moody's has said it is reviewing the Baa2 credit rating it assigns South Africa, two notches above junk, a process that could take 30 to 90 days.

The dismissal of Gordhan, seen for some time by pundits as the target of political pressure from a faction allied to Zuma, threatens to split the upper echelons of the ruling ANC.

The sacking has been publicly criticised by half the party's "Top Six" officials, including Deputy President Cyril Ramaphosa and ANC Secretary General Gwede Mantashe. Zuma, who is also part of the group of six leaders, has his vote and support from the other two members and some groups within the ANC, sources said.

The ANC's National Working Committee met on Tuesday after the "Top Six's" meeting on Monday, aiming to reach a decision on how to handle Zuma over the Gordhan fallout.

Nomura analyst Peter Attard Montalto said Zuma would survive the showdown talks going on for a second day at the ANC's headquarters, saying although political figures were demanding Zuma resign, his support in the party was solid.

"Ultimately, they are not respected by the Zuma faction and their call that he resign is therefore largely irrelevant. The same goes for the SACP and Cosatu. Factions are already set and it's unlikely there will be a swing against Zuma," he said.

On Tuesday, South Africa's main opposition party called for parliament to return from recess to debate the "crisis" triggered by Zuma's cabinet reshuffle.

Previous no-confidence motions against Zuma have failed as the ANC has a commanding majority, but there is a growing backlash against him from within his own party and its allies after a string of missteps leading up to Gordhan's sacking.