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South African President Jacob Zuma takes part in a meeting at the Tokyo International Conference on African Development conference on August 28.
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Agence France-Presse/Getty Images
By
Joe Parkinson
Joe Parkinson
The Wall Street Journal
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- @joewsj
- joe.parkinson@wsj.com
Aug. 28, 2016 12:10 p.m. ET
JOHANNESBURG—Political shockwaves roiling South Africa’s economy continued to reverberate this weekend, with news that a controversial business family linked to President Zuma would sell all their assets in the country and reports that the finance minister would next week be charged for graft.
The Gupta family—owners of a multibillion-rand business empire stretching from mining to media—announced Saturday they would sell all their shareholdings by the end of the year. The Guptas have long been dogged by allegations that they bought influence with Mr. Zuma’s administration to further their business interests and score deals in strategic sectors. The family and the president have repeatedly denied any impropriety, but South Africa’s anticorruption watchdog said last month it would get more funds to investigate the allegations.
In a statement, the Guptas confirmed their intention to sell their assets by the end of the year, adding they were “already in discussions with several international prospective buyers.”
The unexpected news was followed Sunday by reports that Finance Minister Pravin Gordhan would this week be charged for graft in relation to his time heading the South African Revenue Service. It wasn't immediately possible to verify the reports, with neither the treasury nor the prosecutor’s office responding to calls for comment.
The reports could add to the pressure on South African assets, which tumbled this week on news that Mr. Gordhan—a minister widely-respected by international investors—had been summoned by an elite police division in connection with an investigation into a “rogue spy unit” established in the revenue service when he headed the organization. The news sent the rand 5% lower; aggravating the perilous state of South Africa’s economy, which is hovering close to recession and just one notch above junk status.
Analysts said the weekend’s developments were both facets of a broader battle between South Africa’s president and his finance minister that has reopened in the wake of the ruling African National Congress’s worst election result since the collapse of apartheid, stoking fears over the stability of Africa’s most developed economy.
Stung by local election losses that saw the party of Nelson Mandela cede power in several key constituencies for the first time since apartheid, Mr. Zuma has called for the national budget to be “reprioritized.” Mr. Gordhan has pledged to cap spending and debt as he battles to stave off a credit-rating downgrade to junk.
Mr. Zuma on Thursday said he backed Mr. Gordhan but was powerless to stop a police investigation into his conduct, signaling a protracted battle that could prolong market volatility.
The perceived tussle between Mr. Zuma’s confidants and more market-oriented South African officials has been brewing since Mr. Gordhan was installed in December after the president’s attempt to remove then finance minister Nhanhla Nene—a respected fiscal hawk—with an untested loyalist.
News that the Guptas—led by three brothers from the Indian state of Uttar Pradesh who made their fortune after relocating to South Africa in the years after apartheid—could leave South Africa vaults them back to the top of the news agenda six months after deputy finance minister Mcebisi Jonas said the family had offered him the post of finance minister in Mr. Zuma’s government; an allegation the Guptas denied. The exit will affect the Gupta’s holding company Oakbay Investments, which controls Johannesburg-listed Oakbay Resources. The family also own the New Age newspaper and the ANN7 news network.
Mr. Zuma has long stressed that there is nothing illegitimate about his relationship with the Guptas, who were long in business with his son Duduzane Zuma, one of his more than 20 children. A Gupta family spokesman told ANN7 news that the decision to divest from South Africa had “been on the cards” since April, when the brothers had resigned from the directorships of their companies. Duduzane Zuma in the same month resigned from the board of the Gupta-controlled Tegeta mining company, while several major South African banks severed their relationships with the family.
The Gupta’s Saturday statement said they had been the victim of a political attack. “We have no interest in politics, only business,” the statement said.
Write to Joe Parkinson at joe.parkinson@wsj.com
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