Investor confidence will plummet on Gordhan move - academic

Cape Town - All the good work done during a recent government tour to boost investor confidence has now gone down the drain with the summons on fraud charges served against Finance Minister Pravin Gordhan on Tuesday.

This is the warning given by Professor Jannie Rossouw, head of the Wits School of Economic and Business Science.

Gordhan was at the Open Tender Seminar in Midrand when a summons was delivered at his home.

"The rand will continue to depreciate and we face a risk of a downgrade, which will increase interest rates. The situation does not bode well for citizens, especially in the case of a credit risk downgrade. Borrowing will become more expensive," explained Rossouw.

"It is very sad that the matter has played out like this, especially before the mini budget expected on October 26 2016. It shows that forces in government are trying to force South Africa into a credit risk downgrade."

Focus should be on pursuing charges against Zuma

In Rossouw's view the National Prosecuting Authority (NPA) would serve the country better by rather pursuing charges against President Jacob Zuma.

"The NPA is being misused for political objectives and the country will pay a high economic price," warned Rossouw.

For economist Mike Schüssler the summons for the arrest of Gordhan is highly unusual, to say the least.

"It is also the best way to make all South Africans poorer. If this cannot stand up in court, we must fire (members of) the NPA. The government has the responsibility and privilege to serve South Africa and seek out a better life for all of us," said Schüssler.  

In his view, the latest developments relating to Gordhan undermine South Africans and their wellbeing in the clearest way possible.

"South Africans will pay more for petrol, bread, maize, sugar and more. This is the result of those at the top not caring and being prepared to take the country and its people into poverty," said Schüssler.  

He expects the rand to fall further soon because of the NPA's actions regarding Gordhan.

"A rand back at R15 or R16 to the dollar is back on the cards. It is a sad day for honest people. Why they are getting into labour matters I think should also be questioned," he added.

KPMG economist Christie Viljoen said from an economist’s perspective, this is bad news.

Gordhan a 'beacon of hope'

"Amid so many negative issues emanating from the country’s political and economic system at present, South Africans and foreign investors see Gordhan as a beacon of hope for managing the state’s finances," he said.

"The past few months have often seen speculation about criminal investigations into the past conduct of the minister and this has weighed on domestic and international business confidence. This is also evidenced by the weakening in the rand this morning. The timing is also terrible, being so close to the MTBPS (mini budget) and visits from international rating agencies next month."   

Read Fin24's top stories trending on Twitter:

ZAR/USD
17.00
(-0.36)
ZAR/GBP
21.21
(-0.30)
ZAR/EUR
19.12
(-0.30)
ZAR/AUD
11.81
(-0.62)
ZAR/JPY
0.16
(-0.21)
Gold
1774.43
(-0.02)
Silver
18.05
(+0.69)
Platinum
807.99
(+0.12)
Brent Crude
42.92
(+2.64)
Palladium
1914.00
(+1.46)
All Share
54521.90
(-0.17)
Top 40
50179.89
(-0.26)
Financial 15
10150.02
(-0.64)
Industrial 25
76554.73
(+0.52)
Resource 10
50138.02
(-1.24)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1575 votes
I am taking a hit, but should be able to recover in the next year
23% - 2068 votes
My finances have been devastated
34% - 3086 votes
It's still too early to know what the full effect will be
25% - 2240 votes
Vote