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Johannesburg - South African assets slumped further on Wednesday after Finance Minister Pravin Gordhan said he would not appear before police who had requested him to meet them over an investigation into a suspected rogue spy unit in the tax service.
The police had on Monday asked Gordhan and other top officials at the South African Revenue Service (Sars) to meet an officer of the Hawks on Thursday in relation to contravention of surveillance regulations.
News of Gordhan's summons compounded investors' worries of a leadership wrangle over the Finance Ministry as Africa's most industrialised country teeters near a recession and credit rating agencies consider downgrading it to junk by year-end.
Analysts speculated that there was a plot to remove Gordhan, and his decision not to meet the police as requested appeared to set the stage for what could likely be a prolonged tussle that could rock markets further.
Political pundits have said since February, when he was first asked questions by the Hawks about the unit he set up while at Sars, that Gordhan is a target of political pressure from a faction allied to President Jacob Zuma. The president's office said in May that Zuma was not warring with Gordhan.
The rand extended its losses, falling 1.5% to R14.21 against the dollar in early trade, extending its losses to almost 5% since the news about Gordhan became public late on Tuesday. Bonds also tumbled.
Gordhan said he had been advised by his lawyers that he was under no legal obligation to present himself to the police, and that the head of the Hawks had in the past told him that he was not a suspect in the investigations.
He said that he had already provided a comprehensive statement on the issue to the police and reiterated that the investigative unit set up while he was head of Sars was lawful.
"I am advised by my legal team that the assertions of law made by the Hawks in their letter of 21 August 2016 are wholly unfounded on any version of the facts," he said in a statement.
"I therefore, do not intend to present myself," he said.
"I have a job to do in a difficult economic environment and serve South Africa as best I can. Let me do my job."
Hawks spokesperson Hangwani Mulaudzi said he could not comment on what the next move by the police could be.
NKC political analyst Gary van Staden said Gordhan's refusal to meet the police showed that he had reached his limit.
"It implies that Mr Gordhan is now sick and tired of this stuff, he's sick and tired of the harassment, he's sick and tired of the intimidation and sick and tired of the implied treats and has now said: 'if you are serious, then come and arrest me because I am not playing this game any more'," he said.
Next move
Former finance minister Trevor Manuel said the economy would be "destroyed" if Zuma fired Gordhan after he changed finance ministers twice in one week in December.
Investors and rating agencies back Gordhan's plans to rein in government spending in an economy forecast by the central bank to grow at zero percent this year.
Analysts are worried that a replacement could likely be coerced to abandon such plans, destabilising an economy hammered by falling prices for commodities that range from coal to gold.
Zuma raised concern among investors in December by replacing then finance minister Nhlanhla Nene with relatively unknown lawmaker David van Rooyen. After markets tumbled, Zuma appointed Gordhan, in his second stint in the job.
"Such action (removing Gordhan) will destroy this economy," Manuel told eNCA television. "The next move is actually up to the head of state to call them (Hawks) in and say: if you have compelling evidence let's see what it is."
Opposition leader Mmusi Maimane, whose Democratic Alliance party took control of major cities following August 3 local government polls, said in a statement that "the Gordhan witch-hunt is Zuma's road to the Treasury's keys".
A Zuma-backed plan to build a fleet of nuclear power plants, at a cost of as much as $60bn, has been a cause of tension with the Treasury for months and is likely adding to pressure on Gordhan's position, analysts say.
Russian state-backed companies are the favourites to win the nuclear bid, industry sources say. Nene's refusal to sign off on the nuclear deal led to his downfall, government sources said at the time.
Gordhan has refused to be drawn publicly on whether he supports the nuclear project but has said South Africa will only enter agreements it can afford.
"This is all part of a plot to oust Gordhan," political analyst Prince Mashele said. "Gordhan refuses to sign-off on the Russian nuclear deal."
How the JSE fared
Share prices on the JSE were more in line with global markets on Thursday, as sanity returned after Wednesday’s mad rush to acquire rand hedge shares, reports Fin24 correspondent David van Rooyen.
A slightly stronger rand also spoilt the appetite for shares in companies which earn most of their income abroad and benefit from a softer rand.
By mid-morning on Thursday the All-share index was 0.50% softer at 53 298 points and the Top 40 index was 0.52% lower at 46 615 points, after the Gold index lost 3.31%, the Resources index 2.03% and the Industrial index 0.53%.
The Financial index, the only major index which lost ground on Wednesday, recovered on Thursday and gained 0.79% supported by the slightly stronger rand. On Wednesday most of the big banking shares lost more than 5%.
By mid-morning Barclays Africa [JSE:BGA] was the top performer among the big banks, gaining 2.43% to R158.76 while Nedbank [JSE:NED] traded 2.08% higher at R217.43. FirstRand [JSE:FSR] was also 1.03% higher but Standard Bank [JSE:SBK] traded 0.20% softer at R140.32.
Glencore [JSE:GLN] was again the biggest loser in the mining sector of the London Stock Exchange, and the stock also dropped 4.55% to R32.51 on the JSE. Glencore announced a drop of 66% in full-year earnings on Wednesday due to lower metal prices. BHP Billiton [JSE:BIL] also lost 2.05% to R194.22, but Anglo American [JSE:AGL] lost only 0.89% to R156.70.
The five biggest companies on the JSE, representing 50% of the market capitalisation of the JSE, all traded lower. Naspers [JSE:NPN], which set a new all-time of R2 401.74 on Wednesday, gave some of those gains back and traded 1.68% lower at R2 361.37. SABMiller [JSE:SAB] lost 1.61% to R806.82 and British American Tobacco [JSE:BTI] was 1.19% softer at R890.93. Anheuser-Busch InBev [JSE:ANB] slipped 0.50% to R1 770.85 and Richemont [JSE:CFR] 0.36% to R86.16.
There was again much interest in the retail sector after two more retail groups announced better-than-expected results, following Shoprite’s strong results earlier in the week. Massmart Holdings [JSE:MSM], the South African retailer controlled by Wal-Mart Stores, said first-half profit rose 19% as food and liquor sales lifted. The company traded 0.96% higher at R135.28 as earnings, excluding one-time items, rose to R321m from R269m a year earlier. Sales increased 8.7% to R42bn.
Woolworths Holdings [JSE:WHL] also reported full-year profit that beat analyst estimates after food and clothing sales increased as it benefited from a more resilient, higher-earning customer base. The stock was a solid 3.07% stronger at R135.28 as diluted headline earnings per share, which excludes one-time items, rose 8.9% to R4.53 compared to R4.45 per share estimate of six analysts. Sales rose 16% to R72.1bn.
Shoprite [JSE:SHP] was 0.24% higher at R199.48.
