Business leaders expressed concern on Tuesday following the issuing of fraud charges against Finance Minister Pravin Gordhan by the National Prosecutions Authority head Shaun Abrahams.

Gordhan was ordered to appear in court on November 2 on a charge of fraud related to the pay-out made by South African revenue Services ( Sars) to former deputy commissioner Ivan Pillay when he took early retirement.

The summons comes following instructions in August by the country's priority crimes investigative unit the Hawks that Gordhan appear before it regarding investigations into an alleged Sars rogue investigative unit. Gordhan's lawyers responded and he did not appear.

Banking Association South Africa (Basa) MD Cas Coovadia says his organisation is “fundamentally concerned” with the timing of the decision following Gordhan’s presence at an investor roadshow to the US where he had been promoting South Africa.

“Moreover, the Minister has also been meeting with various ratings agencies at this time, which will continue well into November to guard against any possibilities of a downgrade. We have seen an immediate negative impact as a result of the [National Prosecuting Authority’s] announcement. The rand weakened by 2.93% immediately after the announcement and the banking index dropped,” states Coovadia.

Business Unity South Africa president Jabu Mabuza agrees that it is unfortunate that this development took place shortly after Gordhan’s return from the US, as part of a high-level government, business and labour delegation that aimed to ensure that the country avoided a possible sovereign downgrade.

“While nobody is above the law, we remain deeply concerned about what appears to be the emergence of a pattern which sees serious allegations made against Minister Gordhan made very close to important dates and developments,” added Mabuza.   

South African Chamber of Commerce and Industry CEO Alan Mukoki adds that the impact of these developments on the economy could only be negative, as South Africa’s economy has been growing at a slow rate and the country has been facing a potential credit ratings downgrade.

“We however support the Constitution of the Republic of South Africa and its organs of State; we also support any individuals’ rights as enshrined in the Constitution,” says Mukoki.

Meanwhile, with just over two weeks before the Finance Minister delivers his October Medium Term Budget Policy Statement, BNP Paribas securities South Africa economist Jeffrey Schultz states the formal charges against Gordhan would be viewed in a highly negative light by rating agencies.

He suggests that if Gordhan is removed from his position, rating agencies – most notably Standard & Poor’s – would look into downgrading the sovereign’s long-term foreign currency rating to subinvestment grade credit immediately.

The North-West University School of Business and Governance economist Professor Raymond Parsons says whatever the motives behind the NPA decision, the economy will inevitably pay a high price for the way the matter has been handled.

He says until the issue is resolved it casts a large shadow over South Africa's economic prospects, which the country can ill-afford.

Furthermore, Coovadia says Basa’s position remains absolutely clear - that the law must take its course and the related proceedings must be dealt with in an appropriate and responsible manner to prevent a negative impact on the economy.

He says while Basa will not comment on the merits of the case and allegations, the association is “deeply troubled by this announcement and wishes to reiterate its support and appreciation for the leadership and direction shown by the Minister of Finance, his commitment, the work he has undertaken and what he has been able to achieve thus far within a turbulent environment and under extreme pressure”.

Nomura emerging markets economist Peter Attard Montalto says Nomura does not think ratings agencies will react on today’s news. "Emergency downgrades should only be forthcoming on actual PGxit occurring. We still see S&P and Fitch more likely than not downgrading on 2 December on lower growth and lack of structural reforms alone."

Investec chief economist Annabel Bishop says South Africa is at risk of dropping to subinvestment grade on its path to the potentially game changing 2019 election, with consequent heightened financial market volatility and stagnant economic growth.