Wayne McCurrie, a financial analyst at Ashburton Investments, has warned that the fallout of the Gordhan saga will lead to a significant rise in the price of petrol.
McCurrie said that with the rand back above R14 against the dollar, and the oil price above $52 ‘means that petrol will increase significantly next month, if everything remains the same’.
The global benchmark Brent crude price was trading at around $52.60 a barrel on Wednesday, while the rand was at R14.37 by 09h15, having weakened as much as 3.9% against the dollar on Tuesday.
News24 reported that bank stocks lost R34 billion on Tuesday after finance minister Pravin Gordhan was summoned to appear in court on fraud charges.
Prosecutors alleged Gordhan illegally authorised a colleague’s early retirement and established an illicit investigative unit when he was the head of the national tax agency almost a decade ago.
Gordhan said the move is politically motivated and without merit. He is due to appear in court on November 2, one week after he’s expected to deliver South Africa’s mid-term budget.
McCurrie warned that if Gordhan is forced out of office, South Africa would likely go into recession amid a collapse in the local currency, a rise in interest rates, and inflation.
Neil Roets, CEO of Debt Rescue said that legal action against Gordhan will have severe consequences for deeply indebted South Africans.
Roets said it may lead to downgrades by all three ratings agencies long before the end of the year and a significant weakening of the rand forcing the Reserve Bank to increase the interest rate.
Independent economist Dawie Roodt, said said the major price hikes so far in 2016 – resulting from the prolonged drought – would see further hikes when the economy had to cope with the impending downgrades by ratings agencies and an interest rate increase that was almost certain to follow.