With strong Q2 Gross Domestic Product (GDP) data, improving inflation data and a healthier looking current account as a percentage of GDP, the South Africa economy has been looking like its showing signs of mending in the near term. This has been further supported by ratings’ agencies giving the country breathing room earlier this year (in terms of maintaining the region as an investment grade destination).
Tuesday’s news that Finance Minister, Mr Pravin Gordhan, had been summoned to appear in court on 2nd of November where fraud charges (relating to his former South African Revenue Services employment) are likely to be laid, now looks to unwind much of the progress we have made as a country in the short term.
The timing and motives of the summons are subject to question. Once again the Finance Minister (as he himself has pointed out) see’s allegations arise shortly before Mr Gordhan is set to release his budget speech and ahead of the sovereign rating review scheduled for early December this year.
Thuli Madonsela (Public Protector) has said it best "Either we have a minister of finance who is a fraudster or there are shenanigans and either way we should be concerned".
Tuesday’s market moves have given us a clear indication that Mr Pravin Gordhan is popular among the investment community, as well as a taste of what to expect if the Finance Minister is forced to leave office.
On the currency front, the Rand is at the mercy of disinvestment, as witnessed on the USD/ZAR chart which shows the domestic currency depreciating more than 4% in a single day following the news.