The newsflow from South Africa is not getting any more positive, and that’s keeping the currency under pressure even in the absence of traders in London, the main hub for the time zone.
The rand is around 0.4 per cent weaker in early European trading on Monday, putting the dollar at ZAR14.42.
Over the weekend, local press reported that the finance minister Pravin Gordhan could be charged with graft in the coming days. Last week, Mr Gordhan said he would not comply with a request to present himself at the headquarters of the Hawks, an investigative unit of the police.
The Hawks are conducting a probe into an alleged “rogue” unit set up in 2007 in the South African Revenue Service, during Mr Gordhan’s tenure as the head of the tax agency.
Mr Gordhan has previously said these investigations are an effort to intimidate him, and market participants generally agree this is a sign of unwarranted political interference, holding out hope that he will not in fact be arrested.
But, says BNP Paribas:
We have to acknowledge that the Hawks may well arrest Mr Gordhan – even though the expert consensus appears to be that such an arrest would be illegal – for his nonappearance. There does not seem to be a way in which they could back down (legally, administratively and without losing face) from the stand-off. Whether this was the intention of the president and his circle, we may never know.
There are doubtless people working furiously to avoid such an outcome, but it is a possibility. The rand has already taken a hit on the news and this saga is only likely to damage investors’ already shaky confidence in South Africa.
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