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Gordhan’s Arrest Fears Erode Rand Gains After S.A. Avoids Recession

Gordhan’s Arrest Fears Erode Rand Gains After S.A. Avoids Recession

The South African rand’s gain to a two-week high against the dollar this week after data from the government statistics office showed the country had avoided falling into recession are being eroded by fear over a possible arrest of the country’s Finance Minister.

Statistics South Africa announced on Tuesday that Africa’s largest economy had expanded by 3.3 percent in the three months to end of June. This was a bigger than expected growth of 2.8 percent and a complete reversal of the 1.2 percent contraction in the previous quarter, Fin24 reported.

This is the fastest quarter-on-quarter rise in economic activity since the fourth quarter in 2014.

The rand reacted by rallying to below 14.00 against the dollar before losing some gains as nervous investors kept an eye out on a possible arrest of Finance Minister Pravin Gordhan before the end of this week.

Uncertainty over the global market due to the path of interest rates in the U.S. and Europe also weighed on the local currency.

The currency has been on shaky ground over the past two weeks amid fears that police could charge Gordhan in connection with a surveillance unit he helped set up when he was head of the revenue service, Reuters reported.

“The rand is still susceptible to something happening locally. The fear is basically what’s going to happen with the Pravin Gordhan situation,” Andre Botha, a currency trader at Treasury One, told Reuters on Thursday evening.

City press reported that Gordhan could be arrested within the next two weeks by the Hawks in a case steeped with allegations of political infighting in the ruling ANC party.

The finance minister appealed to be allowed to oversee his ministerial duties in an environment that he described as ‘difficult economically.’

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

Economic analysts said that the police orders are part of plot to remove the minister, adding that his decision to ignore the summons will further rock an already fragile market in Africa’s second biggest economy, Reuters reported.

Gordhan has faced turbulent times since February this year when he started plans to drastically cut government’s spending, key among them a proposed $60 billion nuclear project which cost his predecessor, Nhlanhla Nene his job in December last year.

Democratic Alliance (DA) leader dismissed the police orders against Gordhan as witch-hunt, describing them as attempts by President Jacob Zuma to capture the Treasury.

He called on the National Assembly to debate the recent happenings and hold the executive to account.