South African markets have reacted with predictable alarm to
news that Pravin Gordhan, the finance minister, will be charged with
fraud. The rand has tumbled.
Shares in leading banks plunged more than 5
per cent and bond yields spiked.
It was a virtual replay of last year, when the scandal-prone
president, Jacob Zuma, sacked another respected finance minister and
replaced him briefly with a little known backbencher.
It is also a worrying sign of how ugly things could become
as Mr Zuma’s disastrous presidency draws towards its close in 2019, and
he and the beneficiaries of the patronage system that has extended to
almost all corners of the state, fight to maintain control of the levers
of power.
In December, when he first began meddling in the treasury, Mr Zuma was
persuaded to lay off under intense pressure from business leaders and
right-minded members of the ruling African National Congress. But that
was not before investor confidence was badly shaken.
Mr Gordhan, who gained a strong reputation as finance
minister between 2009 and 2014, was brought back in to steady the ship
and dissuade the rating agencies from downgrading South African debt to
junk.
But if there was a lesson in that episode, it was apparently
lost on Mr Zuma, who has allowed doubts about his commitment to keeping
the finance minister in place to fester throughout the year.
Since almost the day he returned to office, Mr Gordhan has
been hounded by the National Prosecuting Authority on grounds that
appear trivial at best — given the enormous challenges facing the
country.
The charges against him relate to allegations that he
granted — irregularly — an early retirement package to a senior official
working under him in his previous role as head of the South African
Revenue Service.
The NPA insists that the decision to pursue the case is free
of political interference. Few South Africans appear to believe that,
least of all those in the financial sector.
Mr Gordhan is among a dwindling cadre of officials in whose
integrity they still have confidence, the most important defence against
increasingly rapacious ANC members intent on capturing state
institutions and enterprises for selfish ends.
He has fought to rein in wasteful spending and curb
corruption at a time when the economy is stagnant and social tensions
are on the rise.
So the perception, widely held, is that the decision to
prosecute him is part of a plot by the president to rid himself of one
of the last remaining checks on the abuse of power.
The allegations mounting against Mr Zuma, who must contest
the ANC leadership next year, are far more serious although prosecutors
appear reluctant to pursue them.
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He risks facing more than 780 charges of fraud, racketeering
and corruption after the Supreme Court of Appeal recently upheld a High
Court ruling that dropping these seven years ago was "irrational".
His alleged ties with a powerful business family will also
come under the spotlight in a report into "state capture" by the public
ombudsman due in coming days.
He has a strong interest, therefore, in ensuring that his
inheritors in the ANC are allies willing to protect his interests once
he leaves office.
ANC members with a regard for their own and SA’s future,
however, have less and less interest in doing so. Another rating
decision by S&P Global Ratings is due before the year’s end. In
August’s municipal elections the ANC’s share of the vote dropped to its
lowest level since the dawn of black majority rule in 1994.
Mr Zuma is a liability. The sooner fellow members of the ANC realise this, and rein him in, the better for them and SA.
© The Financial Times Limited 2016
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