The potential arrest of finance minister Pravin Gordhan would be a disaster for South Africa, the Democratic Alliance (DA) and analysts have warned.
“The fact that the minister has reportedly been requested to appear before the Hawks suggests he may be informed about possible charges and may face arrest”, said DA MP David Maynier.
“The arrest of the finance minister would shatter investor confidence, risk a sovereign ratings downgrade and be a disaster for the already fragile zero growth, zero jobs economy in South Africa,” he warned.
Maynier said the only option to get to the bottom of the allegations relating to the “rogue unit” is the appointment of a Judicial Commission of Inquiry in terms of Section 84 of the Constitution.
The African National Congress (ANC) reformists seeking to stave off a ratings downgrade have been dealt a major blow by the news.
That is the reaction from economists Dawie Roodt and Peter Montalto, as well as political commentator Daniel Silke on Tuesday.
The rand declined nearly 3.5% to R13.96 and is at a three-week low as a result of the news. “This is very bad news for us,” said Roodt. “The rand is reacting badly. This is not good for us.”
Nomura emerging markets economist, Montalto told Fin24 that the rand will hit R17/$ by the end of the year. “There is no way the SARB will cut (interest rates) in a political climate like this,” he said on Tuesday.
Treasury confirmed that Gordhan was summoned to “present” himself to the Hawks by 10:00 on Thursday, EWN reported.
Former Sars deputy commissioner Ivan Pillay, group executive Johann van Loggerenberg and initial head of the investigative unit, Andries van Rensburg were also asked to report to the Hawks, Daily Maverick reported.
Zuma is not directly linked to who the Hawks investigate, but political analysts believe the investigation has a political dimension to it ahead of next year’s ANC elective conference.
It also comes as some members within the ANC – the reformers – attempt to keep South Africa from sliding into junk status, which would be disastrous for the country as an investment destination and would see an increase in inflation and unemployment.
Silke said South Africa is “entering a danger zone for the reformers”.
“We knew it would come down to the reformers to really act and provide concrete measures for ratings agencies not to downgrade us later this year,” he said. “These look like they are conflicting with those with who retain the status quo, Zuma and his inner circle.”
Silke said the election put this all on ice, and with the dust hardly settling it has started again.
“The danger is that any attack on the finance minister can plunge the country into a Nenegate scenario,” said Silke. “It means an extreme loss in confidence in our capacity to deliver a coherent economic policy.
“Any attack on the finance minister just a few months ahead of ratings agencies could very well push us to junk status. They have repeatedly warned us against this kind of political meddling in Treasury and the position of finance minister.
“If there is action taken against Gordhan or serious attempts to limit his power to keep him from restructuring the SOEs, it could signal to the ratings agencies a negative stance on SA,” he said.
Montalto agreed. “It’s a pipe dream that the elections are positive for SA in the short to medium run,” he said. “The status quo survives and means … patronage and low growth. That is not positive.”
Montalto said the factional war within the ANC was never over. “This is just the next step,” he told Fin24. “However the key thing to bear in mind is that this links with the SOE control move done (on Monday).”
A report on Tuesday said Zuma would head up SOEs, but government said late on Tuesday that this was misunderstood. “To avoid any confusion, it is confirmed that the Inter-Ministerial Committee chaired by Deputy President, Mr Cyril Ramaphosa is responsible for overseeing the stabilisation and reform of state-owned entities,” Minister Jeff Radebe confirmed on Tuesday.
Be that as it may, Montalto said the market does not understand that Zuma has the power. “He has the backing of the majority of the NEC to act (i.e. his own faction) and is swiftly seeking to stamp authority. He has the power to reshuffle Pravin Gordhan, but knows post Nenegate that he needs a narrative to do it (downgrades, Hawks case, etc) now but his power is there to do it still.”
Montalto believes the “war” has some immediacy to it, as South African Airways – which Gordhan oversees – has a deadline to submit its annual financial results to Parliament on September 15.
‘No rift with Gordhan’
On Sunday, the Presidency said rumours of Zuma’s rift with Gordhan over a new board for SAA were false, after a report claimed that Hong Kong is about to ground all flights in the next two weeks due to the crisis at SAA.
The allegation being reported is that Gordhan is withholding a R5bn Treasury guarantee – that will allow SAA to table its annual financial statements – until a new board that excludes controversial chairperson Dudu Myeni is approved by Zuma.
“The Presidency and the National Treasury are working well together on this issue and are seeking solutions together,” it said.
Montalto said Treasury will now “attempt to get popular, press and market support onside”.
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