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The rand dropped sharply on Monday morning after South African President Jacob Zuma recalled his finance minister, Pravin Gordhan, from investor trips to London and New York at the last minute, amid speculation that he is about to reshuffle his cabinet including the Treasury post.
In a statement, the president’s office said that he had instructed Mr Gordhan and his deputy, Mcebisi Jonas, “to cancel the international investment promotion roadshow to the United Kingdom and the United States and return to South Africa immediately.”
No reason was given for the recall by the presidency. The South African Treasury could not be reached for comment.
The rand plunged almost 2 per cent in less than half an hour after the decision was first reported, only moments after it had risen to its highest level since July 2015.
Having risen as much as 0.8 per cent against the dollar earlier on Monday, it dropped to a 1.7 per cent decline for the day. By publication time it had moderated slightly to 12.6120 per dollar, a 1.5 per cent decline.
The rand has been the best-performing currency in the world over the last 12 months, strengthening more than 23 per cent against the dollar, but it has suffered a number of knock backs prompted by the president and finance minister’s long-running power struggle over control of the Treasury (see the chart above).
The dramatic cancellation of the week-long trip will re-ignite concerns over the conflict within the ruling African National Congress.
The roadshow had been designed to reassure investors who have remained nervous about threats to the Treasury’s independence ever since Mr Zuma abruply fired Nhlanhla Nene as finance minister in December 2015, briefly replacing him with a little-known backbencher.
Mr Gordhan returned to the Treasury in the wake of the debacle but has been at loggerheads with Mr Zuma for the past year over reforms to the transparency of state-owned enterprises.
The two have also clashed over the influence of the Guptas, a business family who are Mr Zuma’s friends and have been accused of using their political connections to influence ministerial appointments.
Charges of fraud made by the police against Mr Gordhan in October last year were widely seen as politically-motivated by Mr Zuma, before their abrupt withdrawal.
Speculation over an imminent cabinet reshuffle has risen with the return to South Africa this month of Nkosazana Dlamini-Zuma, the president’s ex-wife and a veteran of previous ANC governments, from a posting as chairperson of the African Union commission.
A ministerial posting would raise Dr Dlamini-Zuma’s profile in a bid to become the ANC’s next president in party elections due in December this year.
The recall also comes a day before a court battle is due to commence between Mr Gordhan and Oakbay, the Guptas’ holding company.
Mr Gordhan has sought clarification from the courts that he is not required to intervene on behalf of Oakbay over the closure of its accounts at several South African banks last year.