This Is How Much The Rand Will Grow If Zuma Resigns


With all the pressure mounting on Jacob Zuma from all angles, hopes are high that the president will succumb by announcing his resignation.

If Zuma resigns, economists say the rand will be among the things that will greatly improve.

Analyzing the current SA economy and how the rand had continued to fluctuate following series of political crisis rocking the country, economists gave an estimate of how far the rand will improve if Zuma stepped down as president

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According to analysis reported by Reuters, the SA rand began to tank the very first time Zuma was marked by scandal and economic stagnation.

It said the rand traded at R8.45 against the greenback on April 2009, when Zuma took oath of office. Then, a euro was worth R11.33; and a single UK pound was R12.71.

Since then, Zuma had continued to face one trial after the other. This has in return had an adverse effect on the SA economy, especially the rand.

“President Zuma’s contribution to the overall political risk assessment of South Africa is significant. He is clearly a drag on both the economic and financial sectors,” said Gary van Staden, a political analyst at NKC African Economics.

“Anywhere between 10 and 15 percent would be a minimum improvement in the currency were it not for President Zuma,” he added.

The rand had a quick turn around immediately after the fraud and theft cases charged by the NPA against the finance minister, Gordhan Pravin.

It however remained unstable following latest release of the the so-called state capture report which revealed Zuma’s hideous political ties with the wealthy South African Immigrants, the Guptas.

South Africa is a net importer of energy, meaning a weaker currency can feed through quickly via the fuel price into inflation, which now stands at 6.1 percent, just above a 3-6 percent target band.

Meanwhile, Peter Attard-Montalto, an emerging market economist at Nomura, said the rand could bounce as much as 10 percent when Zuma resigns. He said his resignation will further allay the fear of the rating agencies threatening to cut South Africa to “junk” status by December.

But the boost might prove short-lived, as any interim leader would be unable to the enact the reforms required to kick-start a flat-lining economy, he added.

“It would obviously delay downgrades,” he said. “But if you had an interim president, I wouldn’t expect too much policy change on the meaningful economic stuff.”

Kevin Lings, chief economist at Johannesburg fund manager Stanlib, on the other hand, put rand fair value at 11.5 to the dollar – a 15-percent premium to its current level – and said it could reach that if Zuma resigns, the downgrade threat eased and fresh life was breathed into economic policy.

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“The combination of the deteriorating political and economic backdrop and the risk of a credit rating downgrade has had quite a big effect on keeping the rand as weak as it is,” Lings said

“If you were to remove those elements convincingly, we would argue you would get a significant rally, and it’s not impossible that it might go back to fair value,” he added.

Will this day ever come? This remains the question on the lips of every South African.

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