Share

Is Gordhan losing his bid to rescue the economy?

Johannesburg - Finance Minister Pravin Gordhan’s efforts to restore investor confidence in the economy and ward off a junk credit rating are being frustrated amid a so-called conspiracy against him.

President Jacob Zuma has spent the past five months lurching from one scandal to the next and has repeatedly undermined Gordhan’s authority. According to the Sunday Times newspaper, Gordhan is now at risk of being charged with espionage, and fired - speculation that drove the rand to a two-month low despite a denial by the presidency. Gordhan on Tuesday called rumours that he was involved in domestic spying “malicious.”

“I don’t think it would be easy for any finance minister in any country in the world to operate in this kind of environment,”  Abdul Waheed Patel, managing director of Cape Town-based Ethicore Political Consulting, said by phone. “To survive you need a single-mindedness about what is best for the country and what is best for the economy. I think he’s got that.”

Zuma’s actions have repeatedly damaged the economy. In December, he named little-known lawmaker David van Rooyen as finance minister, sending the rand and the nation’s bonds into a nosedive before reappointing Gordhan to a post he held from 2009 to 2014. He backtracked only after coming under pressure from business leaders and senior ruling party officials. The SA Reserve Bank has cut its forecast for economic expansion this year to 0.8%, predicting the slowest growth since a recession in 2009.

Deputy Finance Minister Mcebisi Jonas later alleged that he was offered the position by a wealthy Indian family who are friends of Zuma’s in exchange for business concessions. The Guptas, who own businesses in South Africa, have denied any wrongdoing, and Zuma has said only he has the power to appoint ministers.

On March 31, South Africa’s top court found Zuma violated the Constitution when he defied a directive by the nation’s graft ombudsman to repay state funds spent on his private home. A month later, the High Court ruled that prosecutors erred when they dropped a corruption case against Zuma seven year ago, opening the way for 783 charges against him to be reinstated.

Police probe

Zuma has also ignored Gordhan’s demand to fire tax chief Tom Moyane for defying his order to halt an overhaul of the South African Revenue Service. He’s refused to intervene in a police probe into allegations that Gordhan established a rogue investigative unit when he headed the national tax agency.

Gordhan said he and his family found the reports that he faced arrest “extremely distressing” and he couldn’t believe he was being investigated and could be charged because he was completely innocent.

“I would never have thought that individuals within the very agencies of this government would now conspire to intimidate and harass me and my family,” he said Tuesday in an e-mailed statement. “The malicious rumors and accusations about espionage activities are false and manufactured for other motives.”

False reports

Hangwani Mulaudzi, a spokesperson for the Hawks investigative unit, said he knew nothing about a docket implicating Gordhan. Reports of the finance minister’s imminent arrest were false, Shaun Abrahams, the head of the National Prosecuting Authority, told Cape Talk radio. Bongani Ngqulunga, Zuma’s spokesperson, didn’t answer his mobile phone.

“Even if the rumours of Gordhan’s imminent arrest are untrue, the damage has been done,” said Nicholas Spiro, a partner at London-based Lauressa Advisory, which advises asset managers. “It reinforces the perception that Gordhan lacks political support to undertake much-needed reforms - a problem that’s all too apparent in several other major emerging markets, including Turkey and Brazil.”

The rand gained 0.8% to 15.5289 per dollar by 17:55PM in Johannesburg on Tuesday, after sliding 1.6% on Monday.

Gordhan and Deputy President Cyril Ramaphosa downplayed the political turmoil while attending the World Economic Forum’s annual Africa summit in the Rwandan capital of Kigali last week.

Stable democracy

“Countries will go through political issues and challenges from time to time,” Ramaphosa told reporters. “South Africa is a stable democracy. Our institutions are strong, they are robust and they are durable.”

Gordhan’s stewardship of the economy received a stamp of approval from Moody’s Investors Service on May 6, when it affirmed South Africa’s credit rating at two levels above junk after putting the assessment on review for a downgrade. S&P Global Ratings and Fitch Ratings, which both have South Africa one level above junk, will assess the country over the next two weeks. Zuma and Gordhan have pledged to work with business leaders and unions to avoid a downgrade.

The sell-off in South African assets that followed Van Rooyen’s appointment as finance minister made Zuma realise that he had to give the appropriate people the authority to do the job, according to Hendrik du Toit, the chief executive officer of Investec Asset Management, which oversees about $109bn.

“South Africa could still be open to financial pandemonium if there was a gross policy misstep,” he said in an interview in Kigali.

Investors are reassured by Gordhan’s presence, despite concerns about the stability of the government and its policies, said Dominic Barton, global managing director of McKinsey & Co.

“There’s a huge amount of respect for Pravin,” Barton said in an interview in Kigali. “South Africa isn’t on a good path, there’s no question about that.”

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.94
-0.1%
Rand - Pound
23.92
-0.0%
Rand - Euro
20.42
+0.1%
Rand - Aus dollar
12.33
+0.1%
Rand - Yen
0.13
-0.0%
Platinum
908.05
+1.2%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders