The local currency, which weakened to R14.47 following the tweet, recovered some of its losses and was bid at R14.2871 at 5pm, following the government’s intervention.
Minister of Communication Nomvula Makonyane said the Department of International Relations, BrandSA and the Departments of Trade and Industry and Agriculture would communicate to the world the government's position on land reform.
“It is on this basis that we do not believe that the agreements and treaties that we are involved in, such as Agoa, are under threat,” Makonyane said.
South Africa’s eligibility for Agoa has come under intensified scrutiny under President Trump’s administration, which has adopted a far more protectionist stance under his "America First" policy.
Section 104 of Agoa states that a sub-Saharan African country is eligible for membership of Agoa if it “protects private property rights, incorporates an open rules-based trading system, and minimises government interference in the economy through measures such as price controls, subsidies, and government ownership of economic assets”
Washington-based Cato Institute in May urged Trump to issue a pre-emptive warning to the South African government over its intention to expropriate land without compensation.
Trump on Wednesday night put South Africa’s land reform firmly on the world slate when he called on his lead diplomat, Secretary of State Mike Pompeo to “closely study the South Africa land and farm seizures and expropriations and the large-scale killing of farmers”.
Gary van Staden, an analyst at NKC African Economics, said it was unfortunate that South Africa’s land issue had turned into a free-for-all.
“Reducing the complexities and intricacies of the land reform debate into a series of political sound bites is not useful for the process of decision making on key issues such as investment,” Van Staden said.
Trump is known to follow-up on his threats as witnessed in the trade war with China and economics sanctions of Iran and Turkey.
Bianca Botes of Peregrine Treasury Solutions said Trump did not say anything without an agenda.
“While nothing has been mentioned about sanctions, speculation has been rife during the course of today, and it is mostly this speculation driving the local unit lower,” Botes said.
"The Presidency will need to ensure we appease ratings agencies as well as global market participants to avoid a panic in the local market,” Botes said.
The US is one of South Africa’s biggest trading partners.
According to the website of the Office of the US Trade Representative, South Africa was the US’s 42nd largest goods export market in 2016, importing goods worth $4.6billion (R65.76bn). In turn, South Africa exported goods valued at $6.8bn to the US in 2016.
South Africa’s top export categories to the US in 2016 were precious metal and stones at $2.2bn, vehicles at $1.6bn, iron and steel at $507million and machinery at $454m.
John Ashbourne, an emerging market analyst at Capital Economics, said the sharp fall in the rand underlined its vulnerability to external shocks.
- BUSINESS REPORT