South African Rand plunges as Finance Minister faces arrest
What you need to know:
National treasury spokesperson Phumza Macanda confirmed that Mr Gordhan had been asked to report to the police’s specialised unit, the Hawks, on Thursday morning.
Pretoria. (NMG) The South African rand plunged to its lowest in almost a month on Wednesday following reports of a possible arrest of Finance Minister, Pravin Gordhan.
Early morning on Wednesday (7:30 AM local time ) the rand was trading around R13.94 against the US dollar. Last week, the South African currency had strengthened to a high for the year at R13.21.
National treasury spokesperson Phumza Macanda confirmed that Mr Gordhan had been asked to report to the police’s specialised unit, the Hawks, on Thursday morning.
For months, the Hawks have been investigating a surveillance unit within the South African Revenue Service (SARS) set up in 2007 while Mr Gordhan was at the helm of the organisation.
Earlier in the year, widespread reports in South Africa were that the Finance Minister faced arrest for setting up the unit to spy on politicians including President Jacob Zuma.
Analysts say political uncertainty and concerns around the future of Mr Gordhan could prove to be detrimental.
Financial analyst Peter Attard Montalto said investors were going to get very nervous about events surrounding Mr Gordhan’s future.
Political risk
“They basically realised that over the last couple of days that we’ve priced out political risk in South Africa to zero and this is the wake-up call saying that political risk shouldn’t actually be zero,” he said.
Mr Gordhan was roped in last year in December to replace little known David van Rooyen, who was only in office for four days following the ousting of Nhlanhla Nene.
Since then, the South African rand has steadily firmed up.
"Treasury said the Minister was “considering his legal options” after receiving the correspondence from the Hawks.
His lawyer Tebogo Malatji said the minister “would decide if he would make any further statements” on Wednesday.
The opposition Democratic Alliance (DA) has warned the potential arrest of Mr Gordhan would be a disaster for South Africa.
DA MP David Maynier said the fact that the Minister has been requested to appear before the Hawks suggests he may be informed about possible charges and may face arrest.
“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.
