Gordhan Says Police Harassment Over Tax Agency Must Stop (2)

South African Finance Minister Pravin Gordhan said “harassment” by a special police unit must stop after a newspaper said he was given a new deadline of Monday to answer questions about an investigative branch within the revenue service.

The Directorate for Priority Crime Investigation, known as the Hawks, wants information from Gordhan on what he knew about a so-called rogue unit in the South African Revenue Service that investigated political leaders and taxpayers, the Johannesburg-based Sunday Independent said, citing a letter by the police unit’s head, Berning Ntlemeza, to the minister’s lawyers.

“My attorneys have confirmed to me that no other letter has been received by their office” as of March 11, Gordhan said Sunday in an e-mailed statement. “I can also confirm that I am unaware of any ‘new’ letter.”

Gordhan, who set up the unit when he headed the tax body, refused to provide answers in the inquiry before an initial deadline on March 2, disputing the authority of the police to question him on the matter. He said he’d only respond after properly examining what information the police were seeking.

Statutory Powers

In the memorandum delivered to Gordhan’s lawyers on March 12, the Hawks said it may invoke statutory powers to ensure its investigation isn’t obstructed by uncooperative conduct, the Sunday Independent said. The police unit identified Gordhan as a key person who may assist the police in the probe, Ntlemeza wrote.

The second letter to Gordhan is not an ultimatum or a demand, “it’s a letter just to inform the minister that we have raised these issues and we still maintain that we are asking him to assist us with these questions,” Hangwani Mulaudzi, a spokesman for the Hawks, said by phone on Monday. “It’s unnecessary to suggest that we’re harassing him. All the correspondence that we do is done in a professional way between ourselves and his lawyers.”

The Hawks asked Gordhan to respond to their second letter by end of business on Monday, Mulaudzi said. If he can’t, he has to inform the police unit why and Ntlemeza will decide on the way forward, Mulaudzi said.

The police unit is jeopardizing the finance ministry’s efforts to address bond investors’ concerns and defend the country’s fiscal strength, Gordhan said in the statement. Gordhan, business leaders and representatives from labor federations visited the U.K. and U.S. last week after he presented the national budget to parliament on Feb. 24.

Investor Concern

“Investors and the ratings agencies are observing every development in South Africa with a keen eye,” he said. “Once again the Hawks, and those who instruct them, have no regard for the economic and social welfare of millions.”

The rand weakened 0.5 percent to 15.3035 per dollar as of 8:22 a.m. on Monday in Johannesburg.

While the investigation into the revenue service is taking place, Moody’s Investors Service on March 8 put South Africa’s credit rating on review for a downgrade because of weaker growth and poor fiscal outlook. A one-step cut by Moody’s would move its evaluation on par with those of Fitch Ratings Ltd. and Standard & Poor’s, both of which are one level above junk.

Investor confidence in South Africa was hurt after President Jacob Zuma fired then-Finance Minister Nhlanhla Nene in December and replaced him with a little-known lawmaker, causing the rand and bonds to plunge. The market backlash and lobbying by business leaders and politicians forced Zuma to backtrack four days later, leading him to reappoint Gordhan to a position he had held from 2009 to 2014.

He received the first letter days before presenting the annual budget last month.

(Updates with comments from police spokesman in sixth paragraph.)

--With assistance from Rene Vollgraaff To contact the reporter on this story: Andre Janse van Vuuren in Johannesburg at ajansevanvuu@bloomberg.net. To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Karl Maier, Jacqueline Mackenzie

By: Andre Janse van Vuuren

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