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Rand in biggest slide since 2015

File picture: Philimon Bulawayo

File picture: Philimon Bulawayo

Published Mar 31, 2017


Cape Town - South Africa’s rand headed for its biggest

weekly slide since 2015, after the firing of Finance Minister Pravin Gordhan

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raised concerns about the country’s fiscal path and its investment-grade credit


President Jacob Zuma is replacing Gordhan with Home

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Affairs Minister Malusi Gigaba, the Presidency said in a statement Friday.

African National Congress lawmaker Sfiso Buthelezi will replace Gordhan’s

deputy, Mcebisi Jonas.

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The rand was one of the top three emerging-market

currencies last year and early 2017, but politics are again casting a cloud

over the nation’s assets. Gordhan had fended off a downgrade in South Africa’s

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rating to junk, and his commitment to curb spending and government debt had

endeared him to investors. He clashed with Zuma over the affordability of

building nuclear power plants and the management of state-owned companies.

“Market reaction to the cabinet reshuffle and what looks

to have been a clean sweep of the Treasury top team is going to be a

significant negative,” Razia Khan, chief Africa economist at Standard Chartered

Plc, said in an email. “Given past volatility in the rand when a cabinet

reshuffle was even suggested, the expectation is that the impact may be more

pronounced now.”

The rand was down 1.1 percent at 13.4241 per dollar as of

12:19 a.m. in Tokyo trading, leaving it heading for an 8 percent loss for the

week - the worst such performance since the last time Zuma rocked markets with

a finance-minister firing. Back in December 2015, it was Nhlanhla Nene’s ouster

that hurt confidence - an episode that ended with Zuma bringing back the

respected Gordhan to office.

Politics aside, the generally positive environment for

emerging markets, and synchronous pick-up in global economic growth, argues in favour

of South Africa, with its mining assets. Its currency enjoyed a 12.6 percent

jump against the dollar last year - behind only Brazil’s real and Russia’s

ruble among emerging markets, according to data compiled by Bloomberg.

“The annoying, frustrating thing from the South Africa

perspective is that you don’t want political worries now, because things are

trending up, things are picking up,” Moz Afzal, global chief investment officer

of EFG Asset Management, said in an interview in Singapore. “South Africa is

pretty much in the penalty box” for investors now, he said.

As concerns over Gordhan’s position mounted this week,

South Africa’s dollar bonds remained within recent trading rages, and its stock

market was still heading for a weekly advance before confirmation of the

firing. The FTSE/JSE Africa All Share Index was up 0.9 percent through


“Despite the fraught political situation in which South

Africa currently finds itself, we note that dynamics past the immediate horizon

favour out-performance in the country’s assets,” Phoenix Kalen, London-based

director of emerging markets strategy at Societe Generale, wrote in report

dated March 31. The bank’s analysts say that making short bets on the rand is

expensive and seldom works. Kalen advised waiting “for the dust to settle

before entering long positions.”


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