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#RandReport: Rand, bonds tumble as police challenge finance minister

By 1420 GMT the rand had tumbled 2.5 percent to 15.9150 per dollar, just shy of the crucial 16.00 mark

Governments bonds also suffered, with the benchmark issue due in 2026 adding 26.5 basis points to 9.405 percent.Picture: Christa Eybers/EWN

JOHANNESBURG - The rand plunged to its weakest in two weeks and bond yields spiked on Tuesday after police said they would exercise "constitutional powers" to push Finance Minister Pravin Gordhan to answer questions about a spy unit in the revenue service.

By 1420 GMT the rand had tumbled 2.5 percent to 15.9150 per dollar, just shy of the crucial 16.00 mark it hit in late February.

Governments bonds also suffered, with the benchmark issue due in 2026 adding 26.5 basis points to 9.405 percent.

The rand came close to matching its biggest daily losses since 2011 as the statement by the Hawks police unit challenging the finance minister further rattled investors who see South Africa's debt losing its investment-grade ranking.

"Alongside economic growth and debt trajectories, ratings agencies also focus on political stability, so another change in Finance Minister could add to the growing list of reasons for downgrades to junk," said emerging market analyst at 4Cast Rajiev Rajkumar.

Last week Moody's, which rates South Africa two notches above sub-investment level, put it on review for a downgrade, citing poor growth prospects and budget risks, while the two other main agencies have flagged political interference as a major risk to national finances.

"All this talk of police investigations and ultimatums will continue to weigh on South African assets and contribute to heightened volatility in the coming months," Rajkumar added.

Minister Gordhan has repeatedly said that a police investigation into a spy unit within the revenue collection service is part of a smear campaign aimed at tarnishing his and the Treasury's credibility.