South African Rand Jumps After Charges Against Finance Minister Are Dropped
The South Africa rand jumped against the U.S. dollar on Monday after the country’s National Director of Public Prosecutions, Shaun Abraham dropped fraud charges that had been preferred against Finance Minister Pravin Gordhan.
The rand gained 1.6 percent to the green back after the news reached the market, according to Reuters data.
Gordhan was due to appear in court on Wednesday over fraud charges related to the approval of Ivan Pillay’s early retirement package and re-appointment on contract basis in 2010 by the nation’s tax authority body.
Pillay was a deputy commissioner in the South African Revenue Service (SARS), during Gordhan’s tenure as head of the tax body.
“I am satisfied that…Gordhan did not have the requisite intention to act unlawfully,” Reuters quoted Shaun Abrahams, head of the prosecuting authority, saying in his decision earlier on Monday.
Rand-denominated bonds that have been on a fall since May after arrest threats on Gordhan also grew stronger. The R207 bond yield grew to 7.970 percent from the previous 8.100 percent, Herald Live reported.
The national currency hit an all-time low in seven years in January, a month after President Jacob Zuma fired former Finance Minister, Nhlanhla Nene.
It collapsed to R17.9950 against the dollar, eNCA reported.
The Rand fell further earlier in the month after police issued a warrant of arrest against Gordhan.
Analysts had said that the fraud charges facing Gordhan were politically-instigated moves by supporters of the ruling African National Congress (ANC) to oust him from the nation’s Treasury.
They added that arresting Gordhan would plunge the nation’s troubled economy into more trouble than the woes caused by Nene’s sacking last year, BizNews.com reported.
Last month, Gordhan refused to comply with police summons on allegations that he formed a secretive body within SARS that spied on tax records of politicians, including Zuma.
The move increased fears within the financial sector and Futuregrowth Asset Management, an investment firm stopped lending to six state-owned agencies, due to political uncertainty.
The decision by the nation’s prosecutor drew divided reactions from his colleagues and the political class.
“Charges dropped against Min Gordhan, why so much brouhaha when there was no case. This is just not on. Period! Fikile Mbalula, the minister of Sports wrote on Twitter.
The ANC welcomed the decision in a strange turn of events while the Democratic Alliance called for the resignation of the chief prosecutor.