Finance minister Pravin Gordhan was summoned to appear in court on fraud charges next month, the latest twist in a struggle with President Jacob Zuma that could cause South Africa’s credit rating to be downgraded to junk. The rand weakened against the dollar by the most since 24 June.
Gordhan on Tuesday called the summons politically motivated and said “there is no case”, adding that South Africans need to ask why the prosecutors took the decision just weeks before the delivery of the midterm budget.
The minister is due to appear in court on 2 November. Shaun Abrahams, the head of the National Prosecuting Authority, said there had been no political interference.
South Africa’s economy is growing at its slowest pace since a 2009 recession and may lose investment-grade status as S&P Global Ratings and Fitch Ratings review their assessments in December. Both kept their ratings at one level above junk in June, and S&P kept the negative outlook, and said the government must take decisive measures to bolster growth, quell policy uncertainty and end political turmoil to avoid a future downgrade.
“It’s a grave concern and investors are unlikely to react kindly to this development,” Jana van Deventer, an analyst at ETM Analytics in Johannesburg, said by phone. “It’s a reminder to investors of the political instability that’s been playing out in South Africa, especially related to national treasury.”
Gordhan will be charged with fraud related to his approval of the early retirement and subsequent reappointment on a contract basis of former colleague that resulted in a “fruitless” expenditure of R1,1m, Abrahams told reporters in Pretoria.
The finance minister has repeatedly clashed with Zuma, who had dismissed his request to fire the nation’s current tax chief, Tom Moyane, for insubordination and delayed his attempts to install a new board at the loss-making state airline.
Prosecutors have alleged that Gordhan oversaw the establishment of an illicit investigation unit when he was commissioner of the South African Revenue Service.
“I can assure you there has been no political interference in this matter,” Abrahams said. “I will not allow any political interference in the work of this institution. This decision was made within the rule of law and the constitution.”
Rand weakens
The rand weakened as much as 3,4% against the dollar and was trading at 3% lower at R14,23 as of 12.13pm in Johannesburg.
Abrahams said the probe into the allegedly illicit investigative unit is “at an advanced stage but remains incomplete and ongoing”.
“The timing is clearly unfortunate ahead of the rating decision and the midterm budget policy statement in a few weeks’ time,” Mike Davies, an analyst with Kigoda Consulting in Cape Town, said by phone.
“It will place South Africa’s institutional independence under further scrutiny. The case could be used by President Zuma to reshuffle his cabinet, which is seen as one of the key motives for the campaign against Gordhan.” — (c) 2016 Bloomberg LP