adminTHE bitter public row between the Hawks and Finance Minister Pravin Gordhan escalated on Tuesday as the unit threatened legal action against the minister, causing the rand to crash through the 16 to the dollar level.
After three weeks of a verbal war, the rise in tone is likely to heighten investor fears over South Africa, and whether Gordhan remained secure in his position. It comes in the midst of a visit to the country by ratings agency Moody’s.
The rand first sank to 16 to the dollar level in December last year after the firing of Nhlanhla Nene as finance minister. Gordhan hit back, describing a Hawks statement that he had not met the deadline to answer questions on an alleged “rogue” unit at the South African Revenue Service (SARS) as threatening”.
The rand breached 16 to the dollar level for the first time since last month following the Hawks’ statement. The currency closed at 15,5316 to the dollar on Monday. Yields on the rand bonds due 2026 surged 28 basis points to 9,42 percent.
Gordhan’s departure could spell disaster for an economy threatened with recession and on the brink of having its credit rating downgraded to junk. President Jacob Zuma reappointed Gordhan in December as finance minister, to help rebuild investor confidence.
Two weeks ago president Zuma said Gordhan was not in jeopardy, but the Hawks’ pursuit of him — first before the budget and last week during global road shows — raised fears he is at risk.
“It’s a cause for concern,” Rune Hejrskov, at Jyske Bank in Silkeborg, Denmark, said. “Absolutely, we’re pricing South Africa with the possibility that Gordhan may not stay in his job.”
“What they are doing is to undermine his credibility in the eyes of the international community by trying to make him out as a criminal,” George Herman, head of South African investments at Citadel Investment Services, said. “I don’t understand the agenda behind this. It is a cut-your- nose-to-spite-your-face strategy.”
Gordhan said on Tuesday that he had instructed his attorneys to prepare a response to the Hawks’ questions.
The lengthy statement by the Hawks accused Gordhan of attempting to stall its investigation into the unit and of seeking “preferential streatment”.
The fight between the Hawks and the minister erupted after the unit sent him a list of 27 questions on the “rogue” SARS unit on the eve of the budget.
After African National Congress (ANC) secretary-general Gwede Mantashe also questioned the timing of the letter, the Hawks said it was not investigating Gordhan’s “per se”.
The battle is tied to Gordhan’s tense relationship with SARS commissioner Tom Moyane, who began driving the probe into the unit, and all those linked to it, shortly after taking up the post at the tax agency at the end of 2014.
Zuma is meant to be dealing with the problems between Moyane and Gordhan. The issue was high on the list of concerns raised by investors with the finance minister and others on a road show last week. Gordhan has consistently maintained that the SARS unit had been established legally, and with the consent of then finance minister Trevor Manuel.
It also appears that at the heart of the latest fight is a misunderstanding emanating from a weekend media report containing details of a letter sent by the Hawks to Gordhan. On Sunday, Gordhan issued a harsh statement accusing the Hawks of “intimidation and harassment” akin to apartheid era police after the Sunday Independent reported that he had until Tuesday to respond to the questions the Hawks had sent him last month.
The Hawks in its statement on Tuesday took issue with Gordhan’s comments on Sunday indicating that he had not received a “new” letter . . . – BDLive
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