South Africa’s finance minister said on Friday he would take legal action to protect himself from what he called attempts to discredit him and the integrity of the Treasury.
The rand fell after Pravin Gordhan’s statement and another from President Jacob Zuma expressing his confidence in Gordhan, whom he appointed in December after a previous change of finance minister triggered a plunge in the South African currency.
Gordhan’s statement followed a newspaper report which quoted sources as saying he had threatened to resign after receiving a letter from the elite Hawks police unit questioning his knowledge of a suspected rogue unit at the revenue service.
Confirming he had received a letter with those contents, Gordhan said in a statement it was “an attempt by some individuals who have no interest in South Africa, its future, its economic prospects and the welfare of its people”.
“I can categorically state that the Hawks have no reason to ‘investigate’ me,” said Gordhan, a former head of the South African Revenue Service (SARS), who won widespread respect during an earlier term as finance minister from 2009 to 2014.
In a separate statement, Zuma said he had full confidence in Gordhan and dismissed “rumors and gossip which insinuate some conspiracy against minister Gordhan”.
The Business Day newspaper said on Friday that Gordhan had threatened to resign from the cabinet last weekend, ahead of his budget speech on Wednesday, unless current SARS commissioner Tom Moyane was removed from his role.
Quoting sources, it said the ultimatum to Zuma reflected a serious deterioration in Gordhan’s relationship with Moyane, who remains in the job. The two men have clashed amid a probe into a unit which allegedly operated unlawfully in the department under Gordhan’s watch during his previous stint as finance minister.
At a function on Friday, Gordhan criticized Moyane for defying instructions to halt a restructuring exercise at SARS, underlining rising tensions between the finance ministry and the tax collection agency.
“I think it is absolutely unacceptable for the head of a government entity to be defiant of the executive authority that is responsible for that entity,” Gordhan said at the event.
“WHAT IS THERE TO HIDE?”
“And if there is such defiance, one must ask the question, what is there to hide?”
Moyane was not immediately available to comment.
The tensions surrounding the finance ministry come at a time when Africa’s most industrialized economy is stalling, with growth now seen at 0.9 percent in 2016, down from the 1.7 percent predicted in October.
South African business leaders urged Zuma to urgently deal with the public spat between Gordhan and Moyane.
“The president must resolve this issue,” Cas Coovadia, spokesman for a group of chief executives who have been interacting recently with Zuma and Gordhan on ways to improve economic growth, told Reuters.
“It would be an absolute tragedy for our country if this results in any uncertainty around minister Gordhan’s ongoing position as minister of finance.”
Zuma appointed Gordhan in December to calm markets after the rand plunged nearly 10 percent following his replacement of finance minister Nhlanhla Nene with a junior politician.
The rand extended losses against the dollar after the statements by Zuma and Gordhan, falling nearly 4 percent to 16.1950 per dollar in volatile trade that set it on track for the biggest daily loss since 2011. The rand was the worst performer among emerging market currencies. Bond yields soared.
“Another change in finance minister would be a disaster for investor confidence and could underpin the prospect of ratings downgrade to junk status,” said Rajiev Rajkumar, EMEA analyst at London-based research house 4Cast.
On Wednesday, Gordhan presented an austerity budget aimed at preserving South Africa’s credit rating and which included spending cuts, civil service job freezes and moderate tax hikes on property sales, fuel, alcohol and capital gains.
Ratings agencies have said they might cut South African debt to “junk” after Zuma’s two changes of finance minister in less than a week in December raised questions about Pretoria’s commitment to prudent fiscal policy.
“I understand that it’s creating a little bit of angst and people are little concerned and worried, but if the markets are concerned about Gordhan stepping down I think that’s completely overplayed,” said George Glynos, managing director at ETM Analytics.
Top Five US Oil and Gas Firms Lost $307bn in Market Value Amid COVID-19 Crisis
Market Value of US Five Largest Companies Decline by $307bn in 2020
Even before the coronavirus pandemic, the oil and gas industry was faced with slumping prices. However, with a record collapse in oil demand amid the coronavirus lockdown, the COVID-19 crisis has further shaken the market, causing massive revenue and market cap drops for even the largest oil and gas companies.
According to data presented by StockApps.com, the top five oil and gas companies in the United States lost over $307bn in market capitalization year-over-year, a 45% plunge amid the COVID-19 crisis.
Market Cap Still Below March Levels
Global macroeconomic concerns such as the US-China trade war and the oil overproduction set significant price drops even before the coronavirus outbreak. A standoff between Russia and Saudi Arabia in the first months of 2020 sent prices even lower.
After global oil demand plunged in March, Saudi Arabia proposed a cut in oil production, but Russia refused to cooperate. Saudi Arabia responded by increasing production and cutting prices. Shortly Russia followed by doing the same, causing an over 60% drop in crude oil prices at the beginning of 2020. Although OPEC and Russia agreed to cut oil production levels to stabilize prices a few weeks later, the COVID-19 crisis already hit. Statistics show that oil prices dropped over 40% since the beginning of 2020 and are hovering around $40 a barrel.
Such a sharp fall in oil price triggered a growing wave of oil and gas bankruptcies in the United States and caused a substantial financial hit to the largest gas producers.
In September 2019, the combined market capitalization of the five largest oil and gas producers in the United States amounted to $674.2bn, revealed the Yahoo Finance data. After the Black Monday crash in March, this figure plunged by 45% to $373bn. The following months brought a slight recovery, with the combined market capitalization of the top five US gas producers rising to over $461bn in June.
However, the fourth quarter of the year witnessed a negative trend, with the combined value of their shares falling to $367bn at the beginning of this week, $6.2bn below March levels.
Exon Mobil`s Market Cap Halved in 2020, Almost $155bn Lost YoY
In August, Exxon Mobil Corporation, once the largest publicly traded company globally, was dropped from the Dow Jones industrial average after 92 years. As the largest oil and gas producer in the United States, the company has suffered the most significant market cap drop in 2020.
Statistics indicate the combined value of Exxon Mobil`s shares plunged by 52% year-over-year, falling from almost $300bn in September 2019 to $144bn at the beginning of this week.
Phillips 66, the fourth largest gas producer in the United States by market capitalization, witnessed the second-largest drop in 2020. Statistics show the company`s market cap dipped by 49.6% year-over-year, landing at $22.9bn this week.
The Yahoo Finance data revealed that EOG Resources lost over $21bn in market cap since September 2019, the third-largest drop among the top five US gas producers.
Conoco Phillips witnessed a 42% drop in market capitalization amid the COVID-19 crisis, with the combined value of shares plunging by almost $30bn year-over-year.
Statistics show Chevron witnessed the smallest market cap drop among the top five companies. At the beginning of this week, the combined value of shares of the second-largest US gas producer stood at $141.5bn, a 36.9% plunge year-over-year.
Gold Hit 26.8% ROI YTD, the Highest Increase in Value Among Top Assets
Gold Delivers 26.8% Return on Investment Year-t-Date
As the world’s earliest form of currency, gold has long been considered a reliable store of value. Unlike banknotes, stock, or other assets, the precious metal managed to preserve the investors’ wealth throughout the years, especially in times of turmoil in the financial markets.
According to data presented by AksjeBloggen, gold hit a 26.8% YTD return on investment, the highest increase in value among top assets.
Gold Return Rate 8.5% Higher than in 2019
Investors tend to focus on gold in times of market volatility, considering it to be a ‘safe haven’ in crises like the coronavirus. In 2019, the value of gold increased by 18.3%, revealed the Blackrock data. The precious metal continued the impressive performance in 2020 with a 26.8% YTD return, 8.5% more than in 2019.
Statistics show that last year, the S&P 500 index increased in value by 31% but was outperformed by Nasdaq, which grew by 35.2%. The MSCI Europe index rose by 26.1% in 2019. China A-shares followed with a 22.3% ROI.
However, the COVID-19 crisis had a massive impact on popular assets, causing a sharp fall in their values during the first half of 2020. The Blackrock data revealed the Nasdaq YTD return hit 23.9%, 11.3% below the 2019 performance. China A stocks reached 10% ROI YTD, much under the 22.3% return in 2019.
Statistics show the S&P 500 index had an 8.4% value increase in the nine months of 2020, almost four times less than in 2019. MSCI Emerging Market Index reached a 4.9% value increase in the same period, compared to 13% in 2019.
The Blackrock data show that crude oil, FTSE 100, and MSCI Europe index witnessed the most significant drop in the nine months of 2020, with their values falling by 34.6%, 22.4%, and 11.5%, respectively.
Global Demand for Investment Gold Surged by 100% YoY
Although many investors value gold as an important portfolio asset, the economic downturn caused by the COVID-19 pandemic led to a surge in global demand for the precious metal.
The World Gold Council data showed the global demand for investment gold increased significantly since the beginning of the year.
In the fourth quarter of 2019, it amounted to 279.2 metric tons. By the end of March, this figure jumped by more than 93% to 539.6 metric tons. The increasing trend continued in the second quarter of the year, with global demand for investment gold hitting 582.9 metric tons, an almost 100% jump year-over-year.
Statistics indicate the global demand for gold for investment purposes hit a record-breaking 1,152 metric tons in the first half of 2020, the highest figure so far.
Oil Prices News: Oil Gains Following Drops in US Crude Inventories
Oil Prices Gain Following Drops in US Crude Inventories and OPEC High Compliance Level
Global oil prices extended their 2 percent gains on Thursday after data showed U.S crude oil inventories declined last week.
The price of Brent crude oil, against which Nigerian oil is measured, gained 0.2 percent or 7 cents to $43.39 a barrel as at 12:10 pm Nigerian time. While the U.S. West Texas Intermediate (WTI) crude appreciated by 8 cent or 0.2 percent to $41.12 barrels.
Oil prices extended their three days gain after the American Petroleum Institute said the U.S crude inventories declined by 5.4 million barrels in the week ended October 9.
The report released after the market closed on Wednesday revealed that distillate stockpiles, which include diesel and heating oil, declined by 3.9 million barrels. Those stated drawdowns almost double analysts’ projections for the week.
“Much of the fall is due to the effects of Hurricane Delta shuttering U.S. production in the Gulf of Mexico, and as such, will be a transitory effect,” said Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.
“Therefore, I am not getting too excited that a turn of direction is upon markets, although both contracts are approaching important technical resistance regions.”
Also, the report that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, referred to as OPEC+ attained 102 percent compliance level with their oil production cuts agreements bolstered global oil outlook. Suggesting that demands for the commodity are likely not growing and could drag down prices in few weeks, especially when one factor in the reopening of Libya’s Sharara oil field, workers returning to operation in Norway and the Gulf of Mexico.
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