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‘On the edge of an economic precipice’

South African Finance Minister Pravin Gordhan. Picture: Siphiwe Sibeko

South African Finance Minister Pravin Gordhan. Picture: Siphiwe Sibeko

Published Aug 25, 2016

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Johannesburg - Support for Finance Minister Pravin Gordhan is mounting as civil society, a union federation and a business grouping announce they are standing behind him.

At the heart of their concern is the potential fallout on the economy, which could take a serious further beating if the minister - who is seen as trusted in international circles - is ousted.

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Already, the rand and the JSE have lost substantial ground in a situation that is reminiscent of President Jacob Zuma’s sudden axing of then finance minister Nhlanhla Nene in December. His replacement, Des van Rooyen, was a relative unknown and the instability reflected in the exchange rate and the all share index.

The ruckus started earlier this week when the Hawks summoned Gordhan to account for his alleged illegal activities during his time as South African Revenue Service commissioner. Gordhan has refuted that he did anything illegal and the National Treasury has published a slew of documents around the matter . This follows the Hawks’ announcement in May that he was not under investigation for anything after a previous market scare around the same situation.

Nomura analyst Peter Attard Montalto says the market had erred when it priced out political risk in recent months. He expects the situation at the National Treasury to unwind quickly, but notes Gordhan will not go without a fight. “That means, ultimately, it will be Zuma’s decision to push the reshuffle button or not. With market positioning the wrong way round, the market reaction will be profound.”

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Montalto notes Zuma has not lost power as he is the “master of playing the ANC, and especially the NEC at its own games, holding it in equilibrium exactly where he wants it”. As a result, he says, zooming out, this is all about winning the ANC elective conference - currently scheduled for December 2017. “Winning the elective conference is about then charting a path under a new leader, but that represents the status quo for the tenderpreneur faction, through to the ANC winning in 2019.

“The route to that is a well-oiled patronage machine, which requires, ultimately, control over National Treasury... We believe that Pravin Gordhan will fight for as long as possible to remain in position and to protect the law, National Treasury, and its staff.”

Speaking out

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Several organisations - including the official opposition - have already spoken out against what many perceive to be an attack against Gordhan.

Freedom Under Law and the Helen Suzman Foundation have come out in support of Gordhan and his former colleagues at SARS, voicing outrage “at this attack on them”.

“Not only are the charges baseless, but the manner in which they have been pursued is clearly calculated to besmirch the names of the individuals and has, predictably, already seriously impaired our national economy.”

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The civil society organisations add “the timing and the manner of the steps against him evidence ill-will towards a loyal public servant who, together with then Minister Manuel and their team of reformers, created arguably the most efficient government agency of the new South Africa. He does not deserve this. Neither do we.”

Business Leadership SA has added its voice to the outcry, saying investor confidence was being restored thanks to the budget speech, the State of the Nation Address and government and business working together to fend off a ratings downgrade. Both S&P and Moody’s are keeping a close eye on SA and may downgrade the country to junk status in December. In addition, SA’s economy is not expected to grow this year.

BLSA adds the recent elections also installed a measure of calm. “All of this progress is threatened by the possible charge, or even arrest, of finance minister Gordhan. No one is above the law. However, the present Hawks investigation of the minister's former role as SARS commissioner lacks any legitimacy or credibility.”

Read also:  Zuma digs in, unsettles markets

The business organisation adds it is “shocking that our national collective effort to avoid a ratings downgrade and to restore inclusive economic growth is now being so insidiously subverted. If this sinister behaviour is allowed to continue the consequences will be devastating for our economy, and will fatally undermine our national efforts to address poverty, inequality, and unemployment.”

The Federation of Unions of South Africa, the biggest non-politically aligned federation, concurs that the charges are unfounded.

General secretary Dennis George says an unwanted market shock will set both workers and businesses on a deeper downward spiral.

“Minister Gordhan should remain committed to dedicating his time to guide our economy, financial systems and institutions, in partnership with labour and business. While our economy faces serious headwinds in very difficult and unpredictable economic environments, we should at all costs avoid undue and irreparable political distractions, but unconditionally focus on restoring higher inclusive economic growth in order to create decent jobs for our people.”

Read also:  DA seeks debate on Gordhan ‘witch-hunt’

In an open letter, several senior academics also urge Zuma, the cabinet and the NEC “to assist in this bringing this dangerous set of events to an end in the best way possible in the interests of our country and our economy”.

“It is time for real leaders in the NEC and the cabinet and in the SACP and COSATU to stand up to the tyrannical and despotic behaviour on display here because yet again we stand on the edge of an economic precipice.”

IOL

For more on this topic, pick up a copy of Business Report tomorrow.

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