Reuters International

Finance Minister Pravin Gordhan gestures during his address at a business summit in Sandton, South Africa, September 13, 2016. REUTERS/Siphiwe Sibeko


By Joe Brock

PRETORIA (Reuters) - South African prosecutors on Tuesday ordered Finance Minister Pravin Gordhan to appear in court on Nov. 2 over allegations he broke public finance rules by granting a colleague early retirement, news that sent the rand and share prices reeling.

The currency <ZAR=D3> dropped as much as 3.4 percent against the dollar on the latest legal problems for the finance minister who says he has been the victim of a politically motivated campaign over the last few months.

Prosecutor Shaun Abrahams said Gordhan, in his previous role as head of the South African Revenue Service (SARS), had cost the tax agency around 1.1 million rand ($79,000) by approving early-retirement for tax agency deputy commissioner Ivan Pillay and re-hiring him as a consultant.

Gordhan is still being investigated for his role in setting up a surveillance unit at the tax department a decade ago which is suspected of spying on politicians including President Jacob Zuma, Abrahams confirmed.

An elite police unit known as the Hawks first questioned Gordhan about that in February in an investigation that some analysts said was the result of political pressure from a faction allied to Zuma.

The president has denied the claims, and said he was not at war with the finance minister.

Abrahams said: "I can assure you there has been no political interference in this matter. There has been no political interference in the decision made."

Gordhan, who is respected by financial markets, has called the allegations about the tax unit "political mischief". He confirmed that prosecution officials had delivered the summons to appear in court to his house on Tuesday morning.

"It looks like we are in for a bit of excitement going forward," he said at a business seminar in Johannesburg. "My lawyers will issue a proper statement in a short while."

David Maynier, the shadow minister of finance for the main opposition Democratic Alliance party, said prosecuting Gordhan would be "a disaster for the economy" and would make a credit ratings downgrade more likely.

"We must now trust the courts to determine whether there is any merit to these charges," he said in a statement.


In August Gordhan declined to obey a police summons on the inquiry into whether he had used the tax service unit to spy on politicians, saying he had done nothing wrong.

The ruling African National Congress (ANC) urged Gordhan to cooperate with the latest summons and said the lingering investigation was having a detrimental effect on the economy.

The party said it hoped the latest legal step would move the country "a step closer to uncovering the truth from facts" and resolve the saga.

South Africa's Communist Party, a member of a ruling alliance with the ANC, said it was opposed to "political persecutions in any manifestation."

Analysts said the Gordhan summons increased the political risk of doing business in the country.

"This will further erode confidence in the political and economic management of South Africa." Daniel Silke, director of Political Futures Consultancy said. "It will potentially affect our chances of sustaining the current rating agency levels."

In line with the weaker rand, South African bank stocks fell nearly 5 percent to a four-week low.

Government and dollar bonds also fell sharply, while the cost of insuring exposure to South African debt leapt to three-month highs.

Investors and rating agencies back Gordhan's plans to rein in government spending in an economy that has been forecast by the central bank to grow at just above zero percent this year.

A cut to "junk" status in ratings reviews due later this year would have pushed up Pretoria's borrowing costs, making it harder to plug the budget deficit.

(Additional reporting by Olivia Kumwenda-Mtambo, Ed Stoddard and Tanisha Heiberg in Johannesburg; Writing by James Macharia; Editing by Ed Cropley and Robin Pomeroy)


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