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South Africa's finance minister hits back at impropriety allegations

Holly Ellyatt and Chris Bishop
SA can give investors confidence: SA Finmin

South African Finance Minister Pravin Gordhan has fought back against allegations that he had "spied" on politicians in his previous role as taxation commissioner, telling CNBC that his top priority was focusing on rebuilding investor trust in South Africa.

"We will be endeavoring to clear the air as soon as possible so we give South Africans and the world confidence that South Africa's institutions, particularly the economic institutions, are still solid and under good leadership and that they will continue to pursue the policies that have given us a good reputation," Gordhan told CNBC Africa Tuesday.

Gordhan is currently under close scrutiny amid a police investigation into whether he oversaw a so-called "rogue spy unit" when commissioner of the South African Revenue Service (SARS) from 1999 to 2009, to spy on politicians, including President Jacob Zuma.

The finance minister has denied any wrongdoing or any knowledge of unconstitutional acts by the unit. The investigation has also been criticized as tantamount to a political witch hunt after Gordhan's criticism of government expenditure, particularly by top political offices, and corruption.

Ruvan Boshoff/The Times/Gallo Images/Getty Images

Referring to the case on, Gordhan said there was no "legal clarity" and "no substance" to the allegations. He said rumors that he was to be arrested were "mischievous to say the least" and that he was focused on delivering economic reforms.

"In about six weeks' time, we've got to deliver the medium-term budget policy statement on behalf of government and that's where our focus is."

Asked why the allegations of wrongdoing dating back to 2009 had surfaced now, Gordhan said it was "a question that all of us can start speculating on."

His deputy, Mcebisi Jonas, defended his boss on Tuesday by saying that the investigation was destabilizing the government and creating uncertainty across Africa's most industrialized economy, Reuters reported.

"We feel confident there is no basis for the allegation. We are not worried about that," Jonas told 702 Talk Radio, the news agency reported.

His comments come at a tricky time for both South Africa's economy and political sphere. Last month, the ruling ANC party suffered its worst local electoral results since the end of Apartheid, the system of racial segregation that ended in the country in the early 1990s.

The results heightened concerns that the ANC government will avoid painful reforms and try to win back votes by overspending ahead of a national election in 2019.

There's a struggle over government policy in South Africa: Expert

There are fears South Africa could be downgraded to sub-investment — or "junk" — grade by one of the big-three credit ratings agencies by the end of the year. At present, Fitch Ratings rates South Africa at BBB-, one notch above sub-investment grade.

On Tuesday, Fitch's head of Middle East and Africa sovereigns said the ANC was in "panic mode" after August's vote. Jan Friederich warned that this panic could spur "clearly populist measures" like the proposed national minimum wage, which if set too high could cause long-term problems with economic growth.

"Our reading is that the most likely or continued impact of the election is essentially a shift of the ANC into panic mode, where they are very much looking to avoid a repetition or even a further weakening of their electoral support ahead of the next election," Friederich said at a Fitch conference.

Asked how close South Africa was to falling into junk status within the next six months, Gordhan said that was a "magic question" but that it was "crucial to keep ourselves at investment grade level and…to keep ourselves at an attractive destination for investments because that the way we can assure the young people of South Africa that they have a future here."

Meanwhile, the World Bank predicted that South Africa's gross domestic product (GDP) will grow by only 0.6 percent this year.

Gordhan told CNBC that investors needed a certain level of certainty and confidence to invest in the country's economy. "I think that it's possible for us in South Africa, notwithstanding all the political noise that happens in every country, to reach that point where we can give (investors) that kind of confidence."

CNBC's Katy Barnato contributed reporting to this story. Follow CNBC International on Twitter and Facebook.