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The Rand Plummets 3% Amidst Zuma- Gordhan Controversy

Author: Sherryn de Vos
Date: 2017-03-28
Zuma’s move on Gordhan has sent the Rand into freefall. Has war just been declared between Gordhan and Zuma?
The unexplained recall of Finance Minister Pravin Gordhan by President Zuma has sent the economy reeling. The Rand had, at the beginning of the week, reached a two-year high against the dollar. Due to Trump’s Healthcare system failing, the Rand had gained strength to R12.31. By the end of the day, it had tumbled to R12.88 against the greenback. Government sources claimed that the trip had not been signed off by the president, hence the cancellation. This, however, has been disputed by sources close to Gordhan, as the Minister is known for being absolutely meticulous.  The ANC claimed to know nothing about the move. They have also stepped away completely from the fray, stating that it is simply none of their business.

Gordhan’s Investment Roadshow Has Been Scrapped

Gordhan, together with his Deputy, Mcebisi Jonas, have been recalled to South African soil in a sudden scrapping of the investor roadshow. Gordhan, who had already landed on US soil will be returning back to the country immediately. Jonas, who had not left SA, has had to cancel his travel plans. The post-budget roadshow is an important part of the Ministers role. These roadshows update international investors on policy updates. It also convinces investors that South Africa remains a good investment destination.
BASA MD, Cas Coovadia has commented that the move is detrimental to South African economic growth. The growth of the last 18 months and confidence built between investors as well as rating agencies will be severely impacted.  "This action by the Presidency rolls back the progress we have made as a country. It also militates against the imperative of ensuring political and policy certainty." Read More about Active vs. Passive Investing Below

It Is Unclear What The Motive Was

Many are speculating that the president simply wanted to humiliate the Finance Minister. Another alternative is suggesting that it is also possible that he is about to be fired from his position. This would not be surprising in the least, as this has been on the table for the last few months. It is a well-known fact that the President and Gordhan have butted heads on numerous occasions, especially around the Gupta saga.
Read More about the Guptas being among the top richest people in SA! 
Another theory is milling around that the President is testing the market, as well as investor loyalty. The Presidency could be wondering how much shock the Rand could take should there be a Cabinet reshuffle in the near future.  Many have seen this has the stress-test of investors as well as the Rand to ascertain what the outcome would be should there be a political shake-up.
David Maynier, DA shadow minister of finance said the president’s instruction to the finance minister is a major setback for the economy in South Africa.“The instruction to cancel the international investor roadshow without explanation is so bizarre that it appears, at best, calculated to humiliate the minister or, at worst, to suggest that the minister is about to be fired in a cabinet reshuffle.

The Move Comes During A Very Interesting Time

This week will see two crucial matters come to a head. Firstly, the seemingly unending Gupta saga will be going to Court this week. Gordhan and the Gupta’s will be going head- to head over the suspicious transactions by the family’s various businesses. The businesses had all of their bank accounts closed in 2016 after various banks pinpointed the activity. The matter was taken to court after it was highlighted that the transactions had a very close proximity to government dealings. The Gupta’s requested the Treasury to get involved, which Gordhan flatly denied. Gordhan's evidence will be heard this week.  Zuma has since, been refused a place in the hearing. His application to join the high-profile case was declined by the High Court today.   Social Grants payments will also be on the table this week. The Treasury has been placed by the Constitutional Court in centre stage to sort out the carnage taking place in the grants. Social Development Minister, Bathabile Dlamini has been given direction by the Treasury on how to progress with the grant payments. The Cash Payment Services and South African Social Security Agency contract will be terminated unless the Treasury steps in. If the contract is cancelled, they will not be able to increase their fees and be able to profit more from the partnership. Dlamini, however, is trying to push for a Ministerial Committee to have the Treasury’s decision in the matter. The Finance Minister is refusing, however, pushing for the dissolution of the contract.
Read More about Minister's cars being valued at almost R17.5 Million below

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