How politics is driving the rand

Over the past few years, investors have proved that, regardless of a nation’s economic soundness, political stability is now a crucial determinant of sentiment and, consequently, capital flows to that country.

Just consider the effects of Nenegate, Brexit and Donald Trump’s presidency.

One cannot simply value a country and its currency based on the prevailing economic indicators, or use standard economic models to forecast these indicators – a political element must also be factored in.

Further fuelling market uncertainty, the line between what’s real and merely political noise has become blurred, with official presidential media releases and Twitter feeds alike dictating the direction of currency movements and eventual economic performance.

Ultimately, as GIBS professor Adrian Saville is fond of saying, “politics doesn’t matter until it does”.

This doesn’t mean economic data should be discounted.

Picture: Bloomberg BIG DEAL. The Competition Tribunal approved Sibanye Gold’s purchase of Lonmin on the condition it doesn’t fire workers at Lonmin’s operations in the six months after the deal closes, Bloomberg reports.