"I have decided to make changes to the national executive," Zuma said in a terse announcement of five senior ministerial changes, which he said was aimed at taking South Africa's transformation forward.
Zuma announced that Sexwale, who defied the president in a recent ANC leadership battle, would be removed as minister for human settlements.
The departure of 60-year-old Sexwale -- who served prison time on Robben Island with Nelson Mandela and is now one of South Africa's richest men -- consolidates Zuma's power base and removes a potential rival.
"Twenty years of democracy have changed the face of our country, and the last five years have pushed that change forward," Zuma said, thanking Sexwale and others for their service.
Sexwale, once a commander of the ANC's armed wing, has long been tipped as a potential leader of the party and of the country.
After the 1994 elections he served as the premier of Gauteng province, which incorporates Johannesburg and Pretoria, but relinquished this post in 1999 to become a businessman.
In the private sector he picked up a string of directorships and assets spanning the mining, engineering and energy sectors, earning most of his wealth in the diamond sector.
Meanwhile the ministers of energy and transport traded portfolios.
But the biggest surprise may have been the ministers who survived.
Basic education minister Angie Motshekga survived despite a scandal that left kids in one province without textbooks for a year.
Her leadership of the ANC's women's league -- which will be a crucial ally in Zuma re-election battle -- appears to have been enough to save Motshekga's cabinet career.
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