SA’s negative spotlight

Jameel Ahmad

The rand has declined as much as 1% on reports that Finance Minister Nhlanhla Nene has asked President Cyril Ramaphosa to release him from his position. The initial selling reaction will increase investor caution on the basis that South Africa may face another round of political risk.

SA is no stranger to political headlines but the initial concern could be that the reaction in the rand to a possible replacement of the finance minister might look similar to what sparked a severe sell-off in March 2017.

But the removal of respected finance minister Pravin Gordhan in March 2017 was part of a wide Cabinet reshuffle by the unpopular then president Jacob Zuma, so it’s not really comparable to this situation.

I would see how this report develops before becoming concerned that another rand slump could be upon us due to internal political risk.

Away from political developments I would look to see if the rand reacts to any global uncertainties, specifically the sharp sell-off in Chinese markets and whether this spreads into other emerging markets.