* Zuma removes respected finmin Gordhan in reshuffle
* ANC risks splitting ahead of December leadership vote
* Zuma weakened but expected to survive
* Gordhan says removed based on “nonsense” intel report (Adds Fitch warning, swearing in)
By Mfuneko Toyana and Tanisha Heiberg
JOHANNESBURG, March 31 (Reuters) - President Jacob Zuma’s midnight sacking of his finance minister shook South African markets on Friday, undermining his authority and threatening to split the African National Congress (ANC) that has governed since the end of apartheid.
Deputy President Cyril Ramaphosa, who is one of the leading candidates to replace Zuma as ANC president, described the decision to remove Finance Minister Pravin Gordhan as “totally, totally unacceptable”.
The comments by Ramaphosa, who usually publicly backs Zuma, were a sign of deepening divisions in the ANC that are likely to worsen until the party elects a new leader in December.
Zuma’s cabinet reorganisation rallied support, however, among powerful sections of the party that are hostile to banking interests they see Gordhan as representing.
The Women’s League and the influential ANC youth wing welcomed the reshuffle, which included moving former youth league leader Malusi Gigaba, 45, from home affairs to replace Gordhan, 67.
“Younger ministers will mean more transformation,” Youth Wing leader Collen Maine said, citing hopes for land redistribution for poor black farmers, free education and more black involvement in state financial institutions.
Ramaphosa said Zuma removed Gordhan on the basis of a “spurious” intelligence report that accused him and his deputy Mcebisi Jonas of plotting with banks in London to undermine the South African economy. Jonas was also fired by Zuma.
“I told the President so, that I would not agree with him on his reasoning,” he said.
Opposition parties and ANC sources say Zuma removed Gordhan because he was obstructing Zuma’s allies’ access to state funds.
Zuma and his followers have been accused by opponents and some senior ANC members of corruption and links with the wealthy Indian Gupta family. A report by a constitutionally-mandated watchdog last year said the Guptas influenced Zuma in making government appointments.
The Guptas and Zuma deny the allegations.
Gordhan said “we should all be afraid” when government decisions are made outside formal structures.
Ramaphosa and former African Union Chairwoman Nkosozana Dlamini-Zuma are viewed as the front-runners to replace Zuma.
Dlamini-Zuma is Zuma’s ex-wife and he is expected to support her while a separate faction will back Ramaphosa, analysts say.
ANC Secretary General Gwede Mantashe also openly criticised Zuma, in what analysts believe is a sign he will back Ramaphosa.
“I’m very uncomfortable because areas where ministers do not perform have not been touched. Ministers who have been moved, the majority of them are performing ministers,” Mantashe told Talk Radio 702.
“I felt like this list has been developed somewhere else and was given to us to legitimise it,” Mantashe added, in a comment that will fuel speculation Zuma is being influenced by people outside government.
Rumours Zuma was to replace Gordhan have unsettled markets all week and ANC members urged the president to reconsider.
The rand has fallen 5 percent since its highest point on Thursday prior to the reshuffle and is set for its biggest weekly decline since December 2015. Banking stocks were down more than 5 percent on Friday and bond yields climbed sharply.
Late on Friday evening, Zuma presided over the swearing in of new ministers and deputy ministers.
Zuma’s determination to change his cabinet has thrown the ANC into its deepest crisis since it swept to power under Nelson Mandela at the end of apartheid in 1994.
Opposition parties called for Zuma to resign; but analysts mostly predicted Zuma would survive the fallout after picking Gigaba to replace Gordhan, a more prudent choice than investors had feared, despite concern budget discipline would falter.
Zuma met with the most senior members of the ANC, known as “The Top Six”, late on Thursday to inform them of the reshuffle but flouted accepted procedure in deciding not to consult them.
“Jacob Zuma has take a huge political risk, possibly the biggest political risk of his career thus far,” Daniel Silke, director at Political Futures Consultancy said.
“This will put further strain on an already fractured ANC. Zuma will survive but he will survive within an ANC that finds itself unable to accomplish just about anything.”
So far the race to replace Zuma has been muted but the divisive reshuffle is likely to split the ANC into two sides, one aligned to Zuma and the other to Ramaphosa, a former trade union boss turned business tycoon.
“These tensions will barrel into the ANC’s succession debate and here we expect the president’s move has strengthened the support for Mr Ramaphosa,” Simon Freemantle, Senior Political Economist at Standard Bank said.
Business and political leaders condemned Zuma and predicted that South Africa’s sovereign credit rating would be downgraded to “junk” in the coming months.
Fitch, one of two rating firms that rate South Africa’s credit score just one notch above junk, said the reshuffle could weaken public finances and standards of governance if the fiscal consolidation championed by Gordhan became less of a priority.
ANC ally the South African Communist Party said the firing of Gordhan, who was seen by investors locally and abroad as a champion of fiscal responsibility, risked triggering the looting of treasury.
Last year the Constitutional Court ordered Zuma to repay 7.8 million rand ($579,004) in inappropriate state spending on his sprawling country home. ($1 = 13.4714 rand) (Additional reporting by Olivia Kumwenda-Mtambo, Nqobile Dludla, TJ Strydom, Olwethu Boso and Ed Stoddard; writing by Joe Brock; editing by Ralph Boulton and Philippa Fletcher)