Things aren’t looking any better for the rand this morning after the South African currency yesterday suffered its biggest one-day fall since the UK’s EU referendum shook global markets.

South African assets have been badly hit by the announcement that Pravin Gordhan, the well-respected finance minister, had been summoned to court on fraud charges.

The rand recovered some of its losses overnight, but by publication time had slipped 0.75 per cent to ZAR14.49 per dollar, its weakest level in a month.

The charges against Mr Gordhan relate to his time in charge of the South African Revenue Service, but many observers believe the investigation is politically-motivated.

Mr Gordhan has been committed to cutting public spending and providing additional funds to state-owned companies, but investors fear that Jacob Zuma, South Africa’s president, wants to replace him with a more pliant minister.

Piotr Matys, analyst at Rabobank, is fairly confident that “common sense will prevail” and Mr Gordhan will be able to keep his job.

It is Gordhan’s credibility and full commitment to meet fiscal targets that may prove sufficient for rating agencies to refrain from downgrading South Africa to junk.

If not, however, the prospects for the rand don’t look great. Moody’s, S&P and Fitch are all expected to review the country’s credit rating before the end of the year, and Rabobank estimates that a downgrade could send the dollar above ZAR16.

Chart courtesy of Bloomberg

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