CAPE TOWN – The rand got a much-needed boost on Wednesday evening, strengthening on President Cyril Ramaphosa’s announcement of a significantly reduced Cabinet.
The domestic currency strengthened by 7c from R14.72 a dollar prior to the president’s announcement to R14.65 a dollar at 10pm.
Of note is that Ramaphosa retained Tito Mboweni as Minister of Finance and appointed David Masondo as Deputy Minister of Finance to replace Mondli Gungubele.
In his announcement, Ramaphosa said: “If we are to make effective progress in building the South Africa that we all want, it is important that we deploy into positions of responsibility people who are committed, capable and hard-working, and who have integrity.
"In appointing a new national executive, I have taken a number of considerations into account, including experience, continuity, competence, generational mix and demographic and regional diversity.”
Rebalance Fund Managers chief economist Chris Harmse said ahead of the announcement that the perceived indecisiveness of the president to announce his Cabinet and the saga around the reinstatement of David Mabuza to parliament, after a meeting with the parliament’s ethical seemed to clear him from wrongdoing, had contributed to domestic currency’s alarming depreciation.
“Financial markets are also concerned over the Pravin Gordon saga. It is believed by many that Public Protector Busisiwe Mkhwebane may have set Ramaphosa up for an attack from within the ANC over the future of Pravin Gordhan,” said Harmse.
The rand quickly broke through key technical levels on Tuesday, declining 2 percent against the greenback to reach R14.71 a dollar, as market participants sold the domestic currency as a proxy for other emerging market currencies.
Bianca Botes, corporate treasury manager at Peregrine Treasury Solutions said one could expect the rand to gain some ground in the local trading session on Thursday, however any gains in the unit would be capped by the global backdrop.
"While Ramaphosa managed to clean up his cabinet, the one question that remains is whether or not the president has been bold enough in his attempt to eradicate corruption and eliminate the stench of state capture that still hangs over the governing party," said Botes.
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