Rand loses some of its shine after recovery plan fails to convince the markets
JOHANNESBURG - The rand eased 0.79 percent to R16.68 to the dollar yesterday, ignoring the release of the much awaited economic recovery plan which failed to convince the markets.
The currency joined a general disregard for President Cyril Ramaphosa’s long awaited economic recovery plan, with the All Share Index falling slightly 0.99percent to 54844points, while the Top40 Index relaxed1.05 percent to 50503 points.
Old Mutual’s Izak Odendaal said much of the elements of the plan would only impact the economy in the coming years, assuming that the implementation was prioritised.
Odendaal said it was important for investors that Ramaphosa reiterated the commitment to fiscal consolidation, though the details would be contained in Finance Minister Tito Mboweni’s medium-term budget in two weeks. “He also offered the possibility of eventually listing some of the better performing State-owned enterprises, which would certainly attract a lot of attention,” Odendaal said. “(But) potentially game-changing interventions such as privatisation and more flexible labour laws seemingly remain out of reach.”
Ramaphosa unveiled his Reconstruction and Economic Recovery Plan which centres on four areas to resuscitate the economy in the medium term.
The plan focuses on a large-scale infrastructure roll-out, security of energy supply, provision of public employment opportunities, and industrial development driven by sector master plans, including through localisation.
The National Treasury said that it estimated that interventions contained in the recovery plan could eventually lift the underlying growth rate to around 3percent over 10 years.
Anchor Capital’s Casey Delport said the recovery plan appeared to be more of a lofty wish list than a concrete policy plan that skirts around the economic reality of South Africa.
Delport said the market remained sceptical surrounding the fundability of the infrastructure projects though a significant boost in infrastructure development was greatly needed
“Furthermore, driving down unemployment by boosting public employment opportunities via schools, municipalities and museums further compounds the already high public wage bill,” she said.
Delport, however, said they welcomed that there would be some form of State-owned enterprises (SOEs) privatisation. Ramaphosa said the government would reduce the reliance of SOEs on the fiscus by intensifying efforts to stabilise strategic companies, accelerating the rationalisation of SOEs and, where appropriate, identifying strategic partners. “Overall, however, the policy remains light on wider SOE reform,” Delport said.
FNB business regional head Andiswa Bata said the plan was encouraging in pushing for local buy and its emphasis on women owned, small businesses and township-based businesses to help create jobs in certain priority sectors.