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South Africa: Business leaders defend Finance Minister Gordhan
August 27, 2016, 6:23 pm

The Centre for Development and Enterprise (CDE) has called the probe an attack on Gordhan and warned of dire consequences for the economy [Xinhua]

The Centre for Development and Enterprise (CDE) has called the probe an attack on Gordhan and warned of dire consequences for the economy [Xinhua]

Controversy and high drama in South African politics took a sharp turn earlier this week when the Directorate for Priority Crime Investigation (also known as ‘the Hawks’) summoned Finance Minister Pravin Gordhan to answer questions in relation to a probe of a purported surveillance unit established while he was head of the country’s tax authority.

The finance minister did not respond to the summons on advice of his attorneys but said he “remained committed to assist the Hawks in any bona fide investigation”.

“I have a job to do in a difficult economic environment and serve South Africa as best I can. Let me do my job,” Gordhan said in a statement.

The probe and the summons come at a sensitive time as South Africa tries to emerge from stalled GDP growth, with some pundits saying nothing could more destabilize the economy and the local currency than this investigation.

Business leaders and former Finance Minister Trevor Manuel have jumped to defend Gordhan.

“Such action 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,” he added.

The Presidency responded by saying the head of state does not have the power to stop an investigation.

“President Jacob Zuma wishes to express his full support and confidence in the Minister of Finance and emphasises the fact that the Minister has not been found guilty of any wrong doing. The Presidency wishes to also emphasise that President Zuma does not have powers to stop any investigations into any individual/s. Our constitutional democracy, the strength of our state institutions and the effectiveness of our courts in upholding and protecting rights is our guarantee of justice and fairness,” the Presidency said in a media statement.

Foreign investors have not taken kindly to the latest intrigue surrounding Gordhan after an earlier brush with the Hawks in May 2016. The rand has weakened from R13.50 per US dollar on August 22 to R14.28 per US dollar on August 24 before closing at R14.37 on Friday.

The rand has in the past year regained much ground against the dollar, but the latest political turmoil risks all that.

Weighing political risks

Peter Attard Montalto, an economist with financial holding company Nomura, said the market had erroneously priced out political risk premia to zero in recent months, when in reality it should have remained as high as in January 2016 when the rand touched a record R17 per US dollar.

“This is going to be a relatively rapidly moving story, in our view – there is political urgency now to the need for change at National Treasury, but Pravin Gordhan will not go without a fight and dig in. 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,” he said.

Gordhan in his media statement noted that he was advised in no uncertain terms by the Head of the HAWKS, General Ntlemeza, in his letter of May 20, that he was not a suspect in the their investigation.

In addition, he had provided a comprehensive account of matters which the HAWKS had raised in their 27 questions on May 18, 2016.

The Centre for Development and Enterprise (CDE) said it was deeply concerned about the latest attack on the Minister of Finance by elements in the country’s law enforcement community.

“To pretend that these events are the result of the disinterested application of the law by police officers acting ‘without fear, favour or prejudice’ (as the Constitution demands of them) to the facts is self-evidently misconceived,” the CDE says before adding, “It is, instead, a politically motivated attempt to discredit the Minister of Finance and to create a seemingly rational basis for removing Mr Gordhan from office.”

The CDE warned that removing Gordhan from office would lead to the installation of what it believes is someone less likely to obstruct “the capturing of the state by a small coterie of dishonest businesspeople and compromised politicians”.

That would produce dire consequences for the South African economy, it warned.

The CDE urged leaders from all sectors of society to call not just for an end to the unjustified persecution of Gordhan, but for an enquiry into the conduct and motivations of the senior officials involved in this “investigation”.

They suggested that civil society use the hashtag #HandsOffPravin to show their support for Gordhan.

Defending Gordhan

The Helen Suzman Foundation, a non-governmental organization dedicated to the promotion of liberal constitutional democracy through broadening public debate and research, was one of the civil society bodies that quickly came to the finance minister’s defense.

“We believe we speak on behalf of all fair-minded South Africans, irrespective of political persuasion, in showing our support for the Minister of Finance and his former colleagues at SARS and our 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. Those behind this campaign of public vilification and persecution must have known this from the outset,” the foundation said.

Professor Raymond Parsons of the North-West University School of Business and Governance said the fallout on the economy could be worse than Nenegate in December 2015, when Zuma removed Finance Minister Nhlanhla Nene and replaced him with David van Rooyen, who himself lasted only four days.

“Unless the conflict between the Hawks and Finance Pravin Gordhan is resolved soon, the collateral damage to the economy will be considerable,” Parsons says.

“If the delicate situation that has developed between the Minister and the Hawks is not successfully managed from now on, the overall effects could well exceed the economic shock South Africa experienced when former Finance Minister Nene was replaced in December 2015,” he added.

Parsons stressed that the confidence factor is paramount.

Helmo Preuss in Pretoria, South Africa for The BRICS Post

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