Rand falls on Zuma impasse
Current limbo drags on
THE RAND yesterday slipped after the ANC’s opaque press conference on President Jacob Zuma’s recall raised more questions on the ANC’s appetite to see the back of Zuma.
The currency, which had strengthened to a high of R11.88 against the dollar in intraday trade weakened to R11.99 after the briefing as the ANC failed to provide timelines on when Zuma would be vacating office.
The party only said that Deputy President Cyril Ramaphosa would succeed Zuma as head of state.
Ace Magashule, the secretary-general of the ANC, said Zuma’s recall was to allow for political stability and urgent economic recovery.
“The decision of the NEC provides certainty to the people of South Africa at a time when the economic and social challenges facing the country require urgent and resolute response by all sections of society,” Magashule said.
Zuma has presided over an economy that has consistently punched below its economic weight, with the National Treasury still battling to close a R50.8 billion shortfall – the biggest since 2009.
Business Leadership South Africa chief executive Bonang Mohale said economic revival to address poverty, unemployment and inequality was a task that could no longer be postponed any further.
“The impasse over Zuma’s tenure has created debilitating uncertainty for our economy as it has deferred important political calendar events including the delivery of the State of the Nation address, and has threatened the national Budget’s delivery,” Mohale said.
The stock market, however, cheered the ANC’s decision to dismiss Zuma.
The all-share index which traded at 57 145 points at 2pm, added a further 64 points after the ANC’s official communication. The blue-chip top 40 index, which was trading at 50 372 at 2pm, added 33 points to 50 405 by close of business.
John Ashbourne, an Africa economist at Capital Economics, said the market impact of yesterday’s news was limited as Zuma’s exit had long been priced in.
“While the ANC has not set a deadline, we doubt that the current limbo will drag past the middle of next week. South Africa’s 2018 Budget speech is scheduled for Wednesday, February 21. Bumping the presentation due to intraparty disruptions would be an embarrassing admission of weakness,” Ashbourne said.
Market sentiment has been positive since Ramaphosa’s elevation to the ANC’s presidency in mid-December.
Annabel Bishop, the chief economist at Investec, said the substantial upswing in investor sentiment could see higher foreign direct investment into South Africa.
“Since Cyril Ramaphosa became president of the ANC, R30.2bn has flowed into South Africa from foreign investors. This is in comparison to the prior around R200bn net outflow of foreign holdings of SA equities (since end 2015),” Bishop said.