Pravin called to court – the reactions

A statement released by National Treasury this week, confirmed the receipt of a summons from the Hawks. The summons relates to charges of fraud (or alternatively theft) by Minister of Finance Pravin Gordhan relating to the early retirement of South African Revenue Service (SARS) deputy commissioner Ivan Pillay.

In the statement from Treasury it noted that it had not received prior notice of the press conference held by Shaun Abrahams, the director of National Prosecutions. It added: “At the press conference, Advocate Shaun Abrahams chose to dwell extensively on allegations concerning the SARS investigative unit under question, which he is not yet able to prosecute. He then turned to the content of the summons, which is concerned with the matters of an administrative – not criminal – nature.”

According to Treasury, these legal proceedings “are contaminated by abuse for political ends.” At an event yesterday, Minister Gordhan said: “This is a moment where all South Africans need to ask whose interests these people in the Hawks, the NPA (National Prosecuting Authority) and the NDPP (National Director of Public Prosecutions) are advancing. Where do they get their political instructions from and for what purpose?”

The charges against Gordhan

Gildenhuys Malatji, on behalf of Minister Gordhan, noted that since the commencement investigation into the SARS investigative unit, Treasury and Gordhan had attempted to engage with the NDPP on the issue.

“We had repeatedly requested that the NDPP afford Minister Gordhan the opportunity to make written and/or oral representations before making a decision on whether to prosecute or not. In particular, the NDPP, advocate S.K. Abrahams, advised us on 25 August 2016 that he will only consider our request to make representations to him on whether to initiate a prosecution of not once the investigation has been concluded and a docket has been submitted to the National Prosecuting Authority,” said Malatji.

In addition Malatji stated: “It was contemplated by the Hawks that he has contravened the provisions of Sections 1, 34 and 81(2) of the Public Finance Management Act, 1 of 1999, that he was guilty of corruption in terms of Section 3, 4 and/or 10 of the Prevention of Corrupt Activities Act, 12 of 2004 as well as Section 3 of the National Strategic Intelligence Act, 39 of 1994. These related to the establishment of an investigative unit at SARS and the early retirement of Mr Ivan Pillay as SARS Deputy Commissioner.”

Opposition parties respond

David Maynier, Shadow Minister of Finance for the Democratic Alliance (DA), said: “The fact that the Minister of Finance, Pravin Gordhan, will be prosecuted and arraigned on charges of fraud and theft is a disaster for the economy in South Africa.”

Maynier highlighted that these charges come just two weeks before the Medium Term Budget Policy Statement (MTBPS). The Rand has responded negatively to the news, and is a concern with the ratings agencies set to assess (and now likely to downgrade) the country’s credit rating.

“We must now trust the courts to determine whether there is any merit to these charges. And we hope that there will be no delay in bringing this matter to court because “justice delayed is justice denied”.

“The fact is that, what Deputy President Cyril Ramaphosa, refers to as “a government at war with itself” is destroying any prospect of boosting economic growth and creating jobs in South Africa,” added Maynier.

According to Dr Pieter Mulder, leader of the Freedom Front Plus (FF Plus), the summons issued against Gordhan “shows a total lack of presidential leadership and holds serious complications for the country’s economy.”

In addition, Mulder noted that the previous reassurances by Gordhan about the future growth of the economy, is void, with the current events appearing to make the expected one percent economic growth unattainable. Following the news yesterday, the Rand lost value against the US Dollar and other currencies.

“The credit rating agency Standard & Poor’s recently warned that it is mainly the political tension and policy uncertainty of the ANC government that is thwarting economic reforms and development in the country.

“It is indeed true that there is no coordination or policy unity from the side of government regarding the country’s economy. This does not bode well for the December ratings,” added Mulder.

The impact of the charges

Peter Attard Montalto, a research analyst at Nomura, noted that the summons for Minister Gordhan to answer questions of fraud are dampening investor confidence and growth. “The “war” has again come to the surface with the National Prosecuting Authority (NPA) summoning Finance Minister Pravin Gordhan for fraud alleged to have occurred while he was SARS Commissioner,” said Montalto.

He added: “We do not think “factions” and “forces” within the ANC and aligned to President Zuma want to see Pravin Gordhan in jail, or indeed that this case could ever come to trial given the politically damaging evidence that could be produced. The issue here is about access to the National Treasury and the ability of factions within the ANC to control it and use its powers to win the elective conference in December 2017. That ultimately would require the removal of Pravin Gordhan who has defended the institution’s conservatism and independence.”

According to Montalto, the Rand will continue to fight to strengthen, however, it will be weakened by news such as this. Despite this, Montalto believed that the MTBPS will not be affected by this news. In addition, he noted that this will likely have little impact on the decisions of the ratings agencies.

“Emergency downgrades should only be forthcoming on actual PGxit (Pravin Gordhan exit) occurring. We still see S&P and Fitch more likely than not to downgrade on 2 December on lower growth and lack of structural reforms alone,” said Montalto.

He added: “Ultimately, we see the political and policy uncertainty continuing through to end-2017, holding back growth, job creation and especially domestic private sector investment, given Zumxit seems highly unlikely and regardless of what occurs around National Treasury. However, clearly if today’s events turned into a reshuffle and a real degradation of the National Treasury as an institution, it would have much larger and longer-lasting negative impacts on the economy.”

Despite the charges against him, Gordhan is not giving up or giving in. He said: “I intend to continue doing my job. The cause of defending ethical leadership in government and throughout society is too important to allow ourselves to be deterred by this kind of harassment. The fight against corruption, maladministration, and waste of public resources will continue.”