Business leaders have rallied around finance minister Pravin Gordhan as he faces police investigations into allegations that he oversaw the establishment of an illicit investigative unit during his tenure as head of the national tax agency.
From the Banking Association of South Africa, which represents the nation’s biggest lenders, to prominent lobby group Business Leadership South Africa and 21 top academic economists, the message has been the same: the allegations against Gordhan amount to a political stitch-up.
“The action against the minister is quite honestly reckless,” Cas Coovadia, the banking association’s MD, said by phone Thursday. “It’s damaging to the economy; it’s not in the national interest.”
Gordhan received a standing ovation on Wednesday night when he arrived to address the Cape Chamber of Commerce and Industry in Cape Town — a stronghold of the opposition Democratic Alliance. Gordhan told the audience that he just wanted to get on with his job and that “the nonsense must stop”.
After three days of rand declines against the dollar following reports that a special police unit known as the Hawks had told Gordhan to report to its bureau, President Jacob Zuma’s office issued a statement saying that while he expressed “full confidence” in the minister, he didn’t have the power to halt the investigation.
For Theo Venter, a political analyst at North West University in Potchefstroom, west of Johannesburg, Zuma’s comments were ambiguous and won’t ease the current uncertainty.
“He is playing the power game to the detriment of the economy,” Venter said by phone. “He has kicked an own goal that will almost guarantee us junk status at the end of the year.”
Opposition parties and some independent analysts have accused Zuma, 74, of trying to gain greater control of the national treasury to further his and his allies’ economic interests before his second and final presidential term ends in 2019. He has denied the allegation.
Plunder nation
Gordhan, 67, has kept a tight hold over state finances, insisting that the budget deficit be curtailed to stave off a credit-rating downgrade and that Zuma’s ambitions of building new nuclear plants can go ahead only if they are affordable.
He’s also refused to approve new loan guarantees for South African Airways until its board, including chairwoman Dudu Myeni, a former schoolteacher who also heads Zuma’s charitable foundation, is replaced.
“We must all do what we can to protect our national treasury against those who want to plunder South Africa and steal from the poor,” Hendrik du Toit, CEO of Cape Town-based Investec Asset Management, which has about US$109bn under management, said in a Twitter posting.
Gordhan has worked with business leaders to preserve the country’s investment-grade credit rating, expand a stagnating economy and create jobs in a nation with a 27% unemployment rate.
“With predictions of zero growth in 2016, stubbornly high unemployment, persistent poverty and inequality and a volatile currency, this is not the time, if there ever was, to be playing such dangerous games,” 21 economists at four of the country’s leading universities said in a statement.
Gordhan was named finance minister in December after Zuma sent markets into a tailspin by firing Nhlanhla Nene from the position and replacing him with little-known lawmaker David van Rooyen.
At the time of Van Rooyen’s appointment, business leaders lobbied Zuma to reverse course. They previously came to Gordhan’s defence when news of the Hawks investigation against him first surfaced.
Fears that Gordhan’s job was on the line pushed the rand to its lowest level in almost four weeks on Wednesday, while yields on benchmark government bonds due December 2026 surged the most since Zuma fired Nene.
The rand strengthened by as much as 1,4% against the dollar on Thursday after Zuma expressed confidence in the minister before paring gains to be little changed at R14,17/$ at 3.49pm in Johannesburg.
Warning statement
The threat of an investigation has been hanging over Gordhan for months. After informing him in May that he wasn’t under investigation, the Hawks wrote the letter asking him to report to its offices on Thursday to receive a warning statement — a possible precursor to being charged. The minister refused to comply, saying he wasn’t legally bound to do so and had done nothing wrong.
Both Gordhan and Trevor Manuel, who was finance minister at the time, said the tax agency’s investigative unit was approved by the cabinet.
Business Leadership South Africa said the investigation against Gordhan lacked any credibility.
“If this sinister behaviour is allowed to continue, the consequences will be devastating for our economy and will fatally undermine our national efforts to address poverty, inequality and unemployment,” the group said in an open letter to Zuma. — (c) 2016 Bloomberg LP
