Rand re­acts on vote out­come

Zuma vic­tory spooks mar­ket

The Star Early Edition - - NEWS - Ka­belo Khu­malo

THE RAND re­versed sharply on Tues­day af­ter Pres­i­dent Ja­cob Zuma sur­vived an eighth mo­tion of no con­fi­dence against him, with mar­kets now mov­ing their at­ten­tion to tom­morow’s rat­ing re­view by Moody’s and Oc­to­ber’s Medium-Term Bud­get Pol­icy State­ment (MTBPS) for cer­tainty.

The lo­cal unit weak­ened by more than 1 per­cent against the green­back af­ter the much an­tic­i­pated vote of no con­fidece againt Zuma failed to pass.

The rand on Tues­day lost its pre­vi­ous day’s gains against the dol­lar and was bid at R13.41 af­ter the re­sults of the vote were an­nounced, from an in­tra­day’s high of R13.12.

Wil­liam Jack­son, a se­nior emerg­ing mar­kets econ­o­mist at Cap­i­tal Eco­nom­ics, said the rand was bound to re­treat af­ter Zuma emerged vic­to­ri­ous from the lat­est chal­lenge to his author­ity as the se­cret bal­lot had cre­ated an ex­pec­ta­tion that he might be voted out of of­fice.

“Lo­cal cur­rency bond yields, which dipped on Mon­day, will probally edge back up,” Jack­son said.

The lo­cal cur­rency unit on Mon­day had firmed to a month’s high against the dol­lar, while the JSE hit new highs af­ter Baleka Mbete made her de­ci­sion on the pro­ce­dure of the vote pub­lic.

Peter At­tard Mon­talto, an emerg­ing mar­kets an­a­lyst at No­mura, said the mar­kets had al­ready done most of their cor­rec­tion, but would grind weaker in the com­ing days as the neg­a­tive sta­tus quo re­asserted it­self.

“We see weaker sec­ond quar­ter growth num­bers, in­creas­ingly weak fis­cal num­bers and a frag­ile MTBPS in Oc­to­ber com­pound the down­grades path in the com­ing nine months.

“The fail­ure of the vote even un­der se­cret bal­lot, we think will main­tain weak busi­ness and con­sumer con­fi­dence and hold pri­vate sec­tor in­vest­ment back,” At­tard Mon­talto said.

Moody’s is ex­pected to pro­vide its rat­ing re­view on South Africa to­mor­row.

Last month the rat­ings agency is­sued a re­search note in which it warned that the un­cer­tainty around the in­de­pen­dence of the SA Re­serve Bank would in­form its fu­ture rat­ing out­look on the coun­try.

It said that it viewed the cen­tral bank’s in­de­pen­dence as key in its out­look on the coun­try’s di­min­ish­ing in­sti­tu­tional strength.

Ray Par­sons, a pro­fes­sor at the North West School of Busi­ness, said that the coun­try was cur­rently fac­ing strong eco­nomic and po­lit­i­cal head­winds, which needed to be care­fully han­dled to min­imise eco­nomic in­sta­bil­ity.

“Af­ter the vote of no con­fi­dence, the MTBPS in Oc­to­ber will be the next ma­jor op­por­tu­nity to boost cer­tainty and cred­i­bil­ity in pol­icy.

“In the con­text of low growth and limited fis­cal space, the up­com­ing MTBPS has now be­come a ma­jor chal­lenge for Min­is­ter Malusi Gi­gaba.

“The fi­nanc­ing and gov­er­nance of state owned en­ter­prises like Eskom and South African Air­ways (SAA) pose high risks to the fis­cal out­look,” Par­sons said.

SAA has asked the Trea­sury for a R13 bil­lion re­cap­i­tal­i­sa­tion over the next three years for it to be­come a go­ing con­cern.

Gi­gaba last week told leg­is­la­tors that talks to re­cap­i­talise SAA were un­der way and that he would make the nec­es­sary pro­nounce­ments in the MTBPS.

The rand has shown volatil­ity ev­ery time a mo­tion of no con­fi­dence has been taken against Zuma, all seven prior such mo­tions in Par­lia­ment and the two within his party had elicited rand strength pre the vot­ing and weak­ness post the vot­ing.

PHOTO: AP

A par­lia­men­tary of­fi­cer shows an empty bal­lot box to the South African par­lia­ment be­fore vot­ing for or against the mo­tion of no con­fi­dence against Pres­i­dent Ja­cob Zuma on Tues­day. The rand has taken a beat­ing af­ter the re­sult of the vote was an­nounced.

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