SA drops controversial fraud charges against finance minister

South African prosecutors have dropped controversial fraud charges against Pravin Gordhan, in a significant victory for the embattled finance minister two days before he was due to appear in court. The charges have been at the centre of a political storm that has rattled investors, with business leaders and some members of the ruling African National Congress arguing that they were politically motivated.

The controversy laid bare toxic power struggles within the ANC and the government amid speculation that President Jacob Zuma wanted to replace Mr Gordhan with a more pliant finance minister. The rand rallied after the charges were dropped, rising 1.3 per cent to 13.6 against the dollar. The currency had fallen nearly 4 per cent when the charges were first announced.

Shaun Abrahams, the director of public prosecutions, who came under fire from activists and opposition politicians for pursuing the fraud charges, wrote to Mr Gordhan's lawyers on Monday saying he would "overrule the decision" to press charges. "As such, I have directed the summons to be withdrawn with immediate effect," he told reporters.

Mr Abrahams announced the charges three weeks ago, alleging that Mr Gordhan had wrongly approved the early retirement of an employee when he was head of the South African revenue service. However, he said on Monday that the approval, even if wrong, “did not show evidence of criminal intent”. Mr Gordhan “did not have the requisite intention to act unlawfully”.

Mr Gordhan, who is respected in South Africa and internationally, has been dogged for months by an investigation into an alleged rogue unit of the revenue service that was set up when he led the tax agency. He has always insisted the unit was set up legally and denied any wrongdoing, while accusing rivals in government of seeking to undermine him and the treasury.

The decision to charge Mr Gordhan had revived memories of Mr Zuma’s shock decision last December to fire Nhlanhla Nene as finance minister and replace him with a little-known backbencher – a move that wiped billions of dollars off South Africa’s markets.

Mr Gordhan, who was reappointed to the treasury after that debacle to calm markets, has been a strident critic of corruption and the political influence of the Gupta family, who are friends with Mr Zuma. The Guptas, who have interests across mining, manufacturing and media, have been accused of using their ties to the president to influence political appointments and win state contracts for their businesses. Both the Guptas and Mr Zuma have denied the allegations.

The fraud case against the finance minister had shown signs of unravelling in recent days after it emerged the Hawks, a police unit that has pursued the investigation against Mr Gordhan, held a revenue lawyer, who disagreed with the charges, hostage in his office.

South African media had also reported that Mr Abrahams met Mr Zuma at the ANC's headquarters the day before he announced the charges against the finance minister. The alleged meeting was widely condemned as being highly unethical and the opposition Democratic Alliance has called for Mr Abrahams to resign. "This only confirms the capture of both the NPA and the Hawks by those who wish to use these institutions to carry out political witch hunts," said Glynnis Breytenbach, a DA MP.

Mr Gordhan was due to appear in court on Wednesday to hear the fraud charges. Opposition parties, civil society groups and business leaders were to hold a protest march in support of the finance minister outside the court in Pretoria, the capital. – Copyright The Financial Times Limited 2016