SA Rand Hits R13.70/$: Gigaba Says Don’t Blame Zuma


The SA rand drops once again to R13.70 to the US dollar following oil slid below $45 a barrel for the first time since last year’s cut on output.

The rand weakened along with many other currencies in the world, the first time after OPEC agreed in November to cut output in November as US shale confounds the producer group’s attempts to prop up prices.

The SA rand continued the roller coaster ride following various internal (which include the SA economic policies and political pressures) and external forces which includes the economic forces surrounding the currency trade market.

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Umkhulu Consulting’s Adam Phillips said it will be a “nervous Friday” for the country as the rand slid past R13.50 and was trading at R13.70 to the dollar by 07:45.

“The fact that oil and commodity prices also moved lower affected emerging market currencies across the board, but with the country’s position the ZAR was a target,” said Phillips who also added that while yields have helped the SA Rand and local bonds perform since the credit downgrading, it appears as though offshore players are looking to participate elsewhere even if they do get a good yield here.

“The oil price is a concern because yesterday OPEC ruled out any supply cuts and a weaker oil price generally affects all emerging market countries. It looks like we are in for a nervous Friday and the volatility that I expected in May has happened rather quicker than I expected.

“We might see more woos for the Rand, but it might be a good time for exporters to protect the downside by looking at zero cost collars. The last time we saw EURZAR above 15.00 was in early December. This is the same for the GBPZAR. In both cases, I am not advocating doing too much, but with politics affecting both currencies it is worth locking in at these levels.” said Phillips

Meanwhile, finance Minister Malusi Gigaba who reacted to the continuous fall of the rand said President Jacob Zuma shouldn’t take the blame for the currency fall.

According to the minister, the Rand has been volatile for quite some times now, thus, people should not blame it on the President’s recent cabinet reshuffle which had the finance minister changed the fourth time.

Gigaba who was one of the panelists at a discussion on the growth outlook for Africa on the second day of the World Economic Forum (WEF) on Africa that is taking place in Durban,  reiterated that the country’s internal political problems aren’t the sole cause of the rand’s failure.

Gigaba was responding to questions asked by Bronwyn Nielsen, editor-in-chief of CNBC Africa, on how he’d assure investors of political stability in South Africa.

During the session,  Frederic Lemoine, chair of the executive board of French company Wendel, criticized African governments for laying out policies that turn out to be harmful to the continent’s economy.

Lemoine cited currency volatility and “unexpected reshuffling of government” as reasons for concern that would cause his company to withdraw its investment.

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When asked to respond to Lemoine’s utterances, particularly with regard to the rand’s rapid movements lately, Gigaba replied by saying it’s normal for democratic countries to go through periodic elections. “General elections, party leadership elections – they’re all part of democracy.

“General elections, party leadership elections – they’re all part of democracy.

“In December this year, you’ll see a contestation for leadership when the ruling party elects a new leader. It happens everywhere in the world – sometimes even abruptly.“In South Africa – through democratic processes – we’ve seen the peaceful transition from one administration to the next.”

“In South Africa – through democratic processes – we’ve seen the peaceful transition from one administration to the next.” says Gigaba.

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