The rand moved onto the back foot with stocks retreating on Friday after President Cyril Ramaphosa's State of the Nation Address failed to rally the markets. Picture: ESA ALEXANDER/POOL
The rand moved onto the back foot with stocks retreating on Friday after President Cyril Ramaphosa's State of the Nation Address failed to rally the markets. Picture: ESA ALEXANDER/POOL

Ramaphosa fails to rally markets

By Siphelele Dludla Time of article published Feb 14, 2021

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JOHANNESBURG - THE RAND moved onto the back foot with stocks retreating on Friday after President Cyril Ramaphosa's State of the Nation Address (SONA) failed to rally the markets.

The rand fell to R14.69 to the dollar during early trade after soaring to a one-month high on Thursday when it ground its way to R14.63 against the greenback.

The JSE benchmark index slightly pared gains early on Friday to 65 847 points following Thursday’s close of 65 882 points, as both the mining and general retailers indices were in the red.

TreasuryONE’s currency risk strategist Andre Cilliers said Ramaphosa's SONA had no impact on the local currency.

“Markets are very much in a holding pattern at the moment with very little big movement anywhere,” Ciliers said.

Ramaphosa’s Sona repeated much of last year's promises, such as creating jobs, with the addition of the Covid-19 vaccination programme to resuscitate the economy.

There was no reference to fiscal challenges, issues that will affect South Africa’s credit rating as that may be left to the finance minister when he tables the Budget in two weeks.

FXTM’s Lukman Otunuga said little information was offered in the Sona on how the government planned to speed up the Covid-19 vaccine programme.

“Given the gravity of the situation and the major threat Covid-19 poses to Africa’s most industrialised economy, the lack of insight on this matter left investors empty handed,” Otunuga said.

“It is becoming clear that the rand is drawing strength from external forces in the form of US fiscal hopes and improving global sentiment.”

However, the speech hit the right notes on expanding energy generation capacity.

Ramaphosa outlined a shift in government’s energy policy to accommodate self-generation, saying 2 600MW of additional renewable energy will be procured soon as part of Bid Window 5.

He also said that within the next three months the government will amend the law to increase the licensing threshold for embedded generation from 1MW as the industry is pushing for 50MW.

Eskom’s outlook for demand and generating capacity indicates a high probability of intermittent power cuts of between 1 000MW and 2 000MW every week for the next couple of months.

The utility this week ramped up load shedding to Stage 3 after a generation unit each at the Lethabo, Kendal and Duvha power stations were taken offline for repairs. Business Leadership SA (BLSA) said the commitment to increase the licensing threshold for embedded generation was a positive step.

“This is another change that could immediately lead to an increase in private sector investment as many companies would quickly begin projects to generate their own electricity,” BLSA said.

“However, we do not believe it is necessary to consult on the threshold this should apply to. Consultation means further delays.”

Over the past year, South Africa has experienced a sharp decline in growth and a significant increase in unemployment due to the Covid-19 pandemic.

NKC African Economics’ Pieter du Preez said the restrictions imposed during the last week of December, which lasted until end-January, will have a significant effect on economic growth in the first quarter of 2021.

“We therefore expect a contraction in the first quarter before a gradual recovery continues, as local demand remains muted due to slow progress in vaccinations and industrial activity being hurt by electricity outages,” he said.

“However, we do not believe it is necessary to consult on the threshold this should apply to. Consultation means further delays.”

Over the past year, South Africa has experienced a sharp decline in growth and a significant increase in unemployment due to the Covid-19 pandemic.

NKC African Economics’ Pieter du Preez said the restrictions imposed during the last week of December, which lasted until end-January, will have a significant effect on economic growth in the first quarter of 2021.

“We therefore expect a contraction in the first quarter before a gradual recovery continues, as local demand remains muted due to slow progress in vaccinations and industrial activity being hurt by electricity outages,” he said.

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