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Investor confidence will plummet on Gordhan move - academic

Oct 11 2016 21:12
Carin Smith

Cape Town - All the good work done during a recent government tour to boost investor confidence has now gone down the drain with the summons on fraud charges served against Finance Minister Pravin Gordhan on Tuesday.

This is the warning given by Professor Jannie Rossouw, head of the Wits School of Economic and Business Science.

Gordhan was at the Open Tender Seminar in Midrand when a summons was delivered at his home.

"The rand will continue to depreciate and we face a risk of a downgrade, which will increase interest rates. The situation does not bode well for citizens, especially in the case of a credit risk downgrade. Borrowing will become more expensive," explained Rossouw.

"It is very sad that the matter has played out like this, especially before the mini budget expected on October 26 2016. It shows that forces in government are trying to force South Africa into a credit risk downgrade."

Focus should be on pursuing charges against Zuma

In Rossouw's view the National Prosecuting Authority (NPA) would serve the country better by rather pursuing charges against President Jacob Zuma.

"The NPA is being misused for political objectives and the country will pay a high economic price," warned Rossouw.

For economist Mike Schüssler the summons for the arrest of Gordhan is highly unusual, to say the least.

"It is also the best way to make all South Africans poorer. If this cannot stand up in court, we must fire (members of) the NPA. The government has the responsibility and privilege to serve South Africa and seek out a better life for all of us," said Schüssler.  

In his view, the latest developments relating to Gordhan undermine South Africans and their wellbeing in the clearest way possible.

"South Africans will pay more for petrol, bread, maize, sugar and more. This is the result of those at the top not caring and being prepared to take the country and its people into poverty," said Schüssler.  

He expects the rand to fall further soon because of the NPA's actions regarding Gordhan.

"A rand back at R15 or R16 to the dollar is back on the cards. It is a sad day for honest people. Why they are getting into labour matters I think should also be questioned," he added.

KPMG economist Christie Viljoen said from an economist’s perspective, this is bad news.

Gordhan a 'beacon of hope'

"Amid so many negative issues emanating from the country’s political and economic system at present, South Africans and foreign investors see Gordhan as a beacon of hope for managing the state’s finances," he said.

"The past few months have often seen speculation about criminal investigations into the past conduct of the minister and this has weighed on domestic and international business confidence. This is also evidenced by the weakening in the rand this morning. The timing is also terrible, being so close to the MTBPS (mini budget) and visits from international rating agencies next month."   

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