South African Finance Minister Pravin Gordhan was summonsed to appear in court on fraud charges next month, the latest twist in a struggle with President Jacob Zuma that could cause South Africa’s credit rating to be downgraded to junk. The rand weakened against the dollar by the most in more than three months.

Gordhan Tuesday called the summons politically motivated and said “there is no case,” adding that South Africans need to ask why the prosecutors took the decision to charge him over approving a retirement package, two weeks before the delivery of the mid-term budget. He’s due to appear in court on Nov. 2. Shaun Abrahams, the head of the National Prosecuting Authority, said there had been no political interference.

“Gordhan has done an outstanding job and enjoys an extremely high degree of confidence,” said Anthony Sedgwick, co-founder of Abax Investments (Pty) Ltd. “Obviously, there is extremely deep suspicion as to what the motive behind the move is.”

Eoin Treacy's view

An independent judiciary is one of the most important positive factors that we can use to determine whether standards of governance can be sustained not to mind improve. The fact South Africa’s courts now appear to be subject to political agendas is a serious retrogression and further highlights the increasingly dire consequences of single party rule without a commitment to improving governance. 

The Rand appreciated from almost ZAR18 to around ZAR13 this year but it now testing the region of the trend mean. A sustained move above ZAR14.50 would break the Dollar’s downtrend and signal a return to demand dominance. 

The South African FTSE/JSE Gold Miners Index has trended lower since August but it is also worth remembering that the weakness of the Rand last year contributed to the South African gold miners’ early leadership. Therefore if the Rand does indeed break its uptrend from early this year it may act as a tailwind for the gold miners’ index in nominal terms. While a short-term oversold condition is evident, a clear upward dynamic will be required to check downward momentum.