South Africa’s finance minister summonsed on fraud charges

South Africa's finance minister Pravin Gordhan has been summonsed to appear in court next month to face charges of fraud related to alleged misconduct during his time as head of the South African Revenue Service (Sars).

The National Prosecuting Authority's national director, Shaun Abrahams, told a press conference on Tuesday that the charges Mr Gordhan will face on November 2nd next are linked to the irregular approval of former Sars director Irvin Pillay's early retirement pay out, which cost 1.14 million rand (€72,000).

Mr Pillay and former Sars commissioner Oupa Magashula have also been summonsed to appear before Pretoria Regional Court in connection with the alleged decade-old fraud, which involved getting the former Sars director a severance package he was not eligible to receive.

Mr Abrahams also confirmed that Mr Gordhan was under investigation for his role in illegally setting up a surveillance unit at the tax department in 2007 to deal with the illicit economy, including the importation of counterfeit goods, drugs and the illegal harvesting of abalone.

The finance minister has denied any wrongdoing, saying the allegations are unfounded and politically motivated by individuals seeking to undermine the current work of the National Treasury.

Mr Gordhan, who was reappointed finance minister last December, has won widespread respect internationally and locally for his efforts to rein in government spending and tackle state-sponsored corruption.

But some of the decisions he has taken relating to state-run enterprises and government spending have reportedly put him on a collision course with South Africa's President Jacob Zuma and his allies.

The news of the charges against Mr Gordhan immediately rattled the financial markets, with the South African rand falling more than 3 per cent within an hour of the story breaking.

Zuma denial

There are also serious concerns the incident will prompt international ratings agencies to downgrade South Africa’s credit rating to junk status, which would raise the cost of borrowing for the government significantly.

In the months following Mr Gordhan’s appointment rumours began circulating that Mr Zuma wanted him removed from office so that someone more sympathetic to the president’s views could be appointed.

Mr Zuma has denied this, and publicly backed the finance minister, but also said he cannot interfere with the police’s investigations. Many political analysts believe Mr Gordhan will be forced to stand down after he is formally charged.

During an interview in the US recently Mr Gordhan labelled the investigation into the legality of the revenue service unit as “political mischief”.

However, Mr Abrahams denied there had been any political interference in his decision to prosecute the finance minister and his former colleagues, and he maintained the formation of the spy unit was simply unconstitutional.

The South African Communist Party said the charges against Mr Gordhan were a “pretext to have him removed from office and weaken the National Treasury’s struggle that he is leading against corruption and corporate capture”.

The ruling African National Congress party welcomed the charges, saying the NPA's announcement would move the country a step closer to uncovering the truth and bringing the matter to an end.