The GBP ZAR exchange rate has spiked today, nearing the levels seen just before last Friday’s flash crash, as South African finance minister Pravin Gordhan was ordered to appear in court over allegations of fraud.
South African Rand (ZAR) Rocked by Fraud Charges
The Rand plummeted today, allowing the GBP ZAR exchange rate to gain, following reports that Gordhan would have to appear in court to face allegations of fraud due to granting a colleague early retirement. It is alleged that the finance minister cost the tax payer around 1.1million Rand by approving early-retirement for tax agency deputy commissioner Ivan Pillay and then hiring him again as a consultant.
Gordhan is also being investigated for his apparent connections to a surveillance unit at the tax department over a decade ago. Gordhan is known to be at odds with President Jacob Zuma and many observers believe the charges are politically motivated and have been referred to as ‘political mischief’ by Gordham himself.
The finance minister is generally well respected by financial markets, and should investors perceive these allegations as an attempt to remove him it is likely that South African Rand (ZAR) exchange rates will drop further.
GBP ZAR Exchange Rate a ‘Dead Cat’ Bounce?
The current spike in the GBP ZAR exchange rate could very well be short lived should President Zuma reconcile with the finance minister, as traders would likely return to focusing on the potential of a ‘hard Brexit’, and the adverse effects losing access to the single markets would have on the Pound.
However, should Gordhan lose in the ‘cabinet war’ then South Africa could possibly see its credit rating downgraded to junk status, which may lead to market sell-off of the Rand.
Current Interbank Exchange Rates
At the time of writing the GBP/ZAR exchange rate was trending around 17.56 and the ZAR/GBP exchange rate was trending around 0.0022.
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