President Cyril Ramaphosa.The rand fell as much as three percent as the economy slipped into a technical recession in the second quarter and missed economists’ expectations. Photo: GCIS

CAPE TOWN - The rand fell as much as three percent on Tuesday as the economy slipped into a technical recession in the second quarter and missed economists’ expectations.

At 1600 GMT, the rand traded 2.82 percent weaker at 15.3000 versus the dollar.

At 08:20 today the rand stood at R15.38 to the dollar.

The economy contracted by 0.7 percent in the second quarter, pushing the country into recession after a revised 2.6 percent contraction in the first quarter, data from Statistics South Africa showed.

“The economy remains lacklustre, partially driven by policy uncertainty. Investment in manufacturing and development has been hampered by uncertainty regarding the mining charter and land redistribution,” said Bianca Botes, an analyst at Peregrine Solutions.

The contraction was contrary to a Reuters poll of economists predicting a 0.6 percent expansion.

Bonds were also weaker, with the yield on the benchmark government debt due in 2026 up 20.5 basis points to 9,21 percent, its highest since June 20, while sovereign dollar bonds sold off across the curve.

On the bourse, the blue chip Top-40 index fell 1.42 percent to 51,691 points while the All-Share index was down 1.4 percent to 57,892 points.

“(There is) a lot of pressure on banks and retailers, as expected with such a weak rand. The emerging market sell-off continuing and the dollar going on a bit of a rampage are also having an effect on our market,” said Vasili Girasis, market trader at BP Bernstein.

The biggest faller was telecommunications operator MTN Group’s, whose shares plunged 17.05 percent to close at R72 after it reported it had been slapped with a $2 billion tax bill by Nigerian authorities.

Further losses were seen in Aspen Pharmacare, Africa’s biggest drugmaker, which was down 7.49 percent to R270.86. It flagged lower revenue for the second half of its financial year, impacted by the stronger rand.

“They got hit by the currency, but going forward, it could be an opportunity to be buying now, with the rand weakening the way it has,” said Girasis. Health and life insurance group Discovery and construction company Wilson Bayly Holmes (WBHO), which released their full-year results, fell by 4.12 percent and 4.67 percent respectively.