RAND DOWN ON GDP DATA

THE RAND fell sharply yesterday after third quarter economic growth showed a surprise contraction, underlying the weak state of the economy and growing risk of credit downgrades.

Among stocks, retail and fast food firm Taste Holdings plunged 20 percent to 4 cents after it said group chief executive Dylan Pienaar was stepping down with immediate effect as part of a restructuring plan to exit the food industry and focus on its luxury goods brands.

At 5.30pm, the rand was 0.76 percent weaker at R14.65 to the dollar. Most of the losses came after the gross domestic product (GDP) figures showed a 0.6 percent contraction as mining, manufacturing and agriculture led a broad based slowdown.

Analysts polled by Reuters had predicted a 0.1 percent expansion in quarter-on-quarter growth.

The data piles the pressure on President Cyril Ramaphosa as ratings agencies have flagged weak growth as a major risk, while investors are weary of increasing state debt as revenues slide.

Moody’s is the last of the top three agencies to rate the country’s debt at investment level, and it is set to review the rating in March after downgrading the outlook to negative in November.

“All-in-all, these GDP numbers have added to what is turning out to be a fairly bleak year for South Africa, with the country beset again by the lack of growth that’s the root cause of our fiscal challenges,” said Maarten Ackerman, chief economist at investment firm Citadel.

Bonds also weakened, with the yield on the benchmark government issue due in 2026 adding 2.5 basis points to 8.475 percent.

On the bourse, stocks fell as well after the GDP data.

Local shares were also dragged down by falling emerging market equities after the US said it would restore tariffs on metal imports from Brazil and Argentina, raising concerns of yet another trade war.

The benchmark JSE Top40 index fell 0.64 percent to 48 299.66 points, while the broader all share index was down 0.6 percent to 54 485.41 points. I Reuters