Rand shrugs off S&P’s concerns
THE RAND largely shrugged off warnings by Standard & Poor’s (S&P) Global Ratings that the country still faced prospects of a downgrade as weak economic growth, political tensions and policy reform concerned investors.
The local currency remained largely unchanged yesterday as data showed that the country’s manufacturing output rose by 0.8 percent year-on-year in January while mining production accelerated to 1.3 percent in the same month.
S&P said it would review the country’s debt standing if political interference weakens institutions and if growth and fiscal metrics did not improve.
“If we see a lot of increasing political tensions, infighting in state institutions which could derail the government’s plans in boosting economic growth, then that can impact on our forecasts on growth,” Gardner Rusike, S&P associate director told a media conference.
The rand was at R13.1063 to the dollar early in the morning, reaching a high of R13.2461 before being quoted at 13.1826 at 5pm.
South Africa’s economy grew by 0.3 percent in 2016 versus 1.3 percent in 2015, well short of the government’s target of 5 percent.
Statistics South Africa said that the manufacturing and mining sectors were expected to fare better in 2017, with output rising off last year’s low base as global growth accelerated moderately and international commodity prices and domestic demand began to improve gradually.
The agency said that the main drivers of the quarterly decline in mining were platinum group metals as well as iron ore.
Nedbank said the performance of mining production should be supported by the projected lift in commodity prices in 2017.
“However, global demand, while expected to be marginally firmer this year, is still subdued and conditions in the domestic mining sector remain challenging, limiting the performance of mining production,” the bank said.
The market expectation was for the country’s manufacturing volumes to rise by 1.05 percent year-on-year in January. – Additional reporting by Reuters