Finance Minister Pravin Gordhan was charged with fraud by the National Prosecuting Authority this week, a move which saw the rand’s value tank against international currencies.
Gordhan faces charges relating to the early retirement of former Sars deputy commissioner Ivan Pillay – which many have questioned the validity and timing of.
Political commentators have stated that the charges are a move by President Jacob Zuma to get rid of the finance minister – potentially giving him control of the National Treasury.
Regardless of the motives behind the move, the effect was felt by the country’s currency – with the rand weakening from around R13.90 to the US dollar to R14.43 following the Gordhan announcement.
Breaking the rand
The recent move against the finance minister is not the first time a South African official has opened their mouths and caused the rand to crash.
In August, the rand traded at R14.74 against the US dollar thanks to political uncertainty surrounding Gordhan.
The rand traded as low as R13.22 in mid-August, but this strength was eroded after news emerged that Gordhan was under fire from the Hawks.
This was preceded by Zuma deciding to fire then Finance Minister Nhlanhla Nene – a shocking decision in December 2015.
Nene was replaced by the unknown Des Van Rooyen – sending the rand to all-time lows vs the dollar.
Zuma was then forced to replace van Rooyen with Gordhan, which saw the currency strengthen.
The latest attacks against Gordhan could also result in South Africa receiving a ratings downgrade from international agencies.
The ratings downgrade and weakening of the rand may lead to an interest rate hike by the Reserve Bank, which will have devastating consequences for South Africans in debt.
Investec economist Annabel Bishop previously stated that removing Gordhan would likely result in the rand weakening by 30% – trading at over R19 to the dollar.
How the rand has been battered
The graphic below shows how political statements and plays have hurt our currency over the past 10 months.