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South African finance minister issued with summons, rand plunges
Finance Minister Pravin Gordhan gestures during a business summit in Sandton, South Africa, September 13, 2016. PHOTO BY REUTERS/Siphiwe Sibeko
By Joe Brock
11/10/2016
PRETORIA (Reuters) - South African prosecutors issued Finance Minister Pravin Gordhan with a formal summons on Tuesday to appear in court on Nov. 2 in relation to the granting of early retirement to a colleague, sending the rand reeling.
The currency fell as much as 3.4 percent when prosecutor Shaun Abrahams also told a news conference that Gordhan was being investigated for his role in setting up a surveillance unit at the tax department a decade ago.
Abrahams said Gordhan, in his previous role as head of the South African Revenue Service (SARS), would be charged with approving early-retirement for former tax agency deputy commissioner Ivan Pillay and then re-appointing him as a consultant.
This cost the tax agency around 1.1 million rand ($79,000), in violation of public finance laws, Abrahams said.
An elite police unit known as the Hawks also has also been investigating Gordhan over the so-called "rogue spy unit" at the tax agency, set up when he was at its helm. Abrahams said the probe on the unit was continuing.
Gordhan was first asked questions by the Hawks about the SARS unit in February, an investigation analysts say was the result of political pressure from a faction allied to President Jacob Zuma. The president has denied the claims.
The affair, which has rumbled on for months, has rattled markets in Africa's most industrialized country, which faces the risk of ratings downgrades later this year.
Gordhan, who is highly respected by financial markets, has painted the allegations about his role in establishing the special tax unit as "political mischief" but said prosecution officials delivered a summons 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."
Abrahams denied any mischief in the handling of the case, and said the surveillance unit acted in a "very strange manner" and without clearance from the national intelligence services.
"I can assure you there has been no political interference in this matter. There has been no political interference in the decision made," Abrahams said.
In line with the weaker rand, South Africa's 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.
(Additional reporting by Olivia Kumwenda-Mtambo and Ed Stoddard in Johannesburg; Writing by James Macharia; Editing by Ed Cropley)
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