Finance minister Nhlanhla Nene testifies during Zondo’s commission of inquiry into state capture on October 03, 2018 in Johannesburg, South Africa. Testifying at the inquiry, Nene revealed that, in a 2-3 minute meeting, former president Jacob Zuma told Nene he was removing him a finance minister and that he would be deployed at the Brics bank. Photo by Gallo Images / Netwerk24 / Felix Dlangamandla
Rand fragility intensified by Nene crisis
The Rand trimmed some of its losses to trade 0.46% weaker at 14.8200 per Dollar at opening today. This after having hit a session low of 14.9875 in early trade yesterday.
Finance minister Nhlanhla Nene testifies during Zondo’s commission of inquiry into state capture on October 03, 2018 in Johannesburg, South Africa. Testifying at the inquiry, Nene revealed that, in a 2-3 minute meeting, former president Jacob Zuma told Nene he was removing him a finance minister and that he would be deployed at the Brics bank. Photo by Gallo Images / Netwerk24 / Felix Dlangamandla
South Africa’s Rand weakened more than 1% on Monday over a newspaper report that Finance Minister Nhlanhla Nene had asked President Cyril Ramaphosa to sack him. This comes at a trying time as Nene is expected to deliver the mid-term budget in less than two weeks.
At the heart of these developments is a statement by Nene that he had made numerous visits to the Gupta family compound (the Guptas are friends of former leader Jacob Zuma accused of unfairly winning state contracts and influencing the firing of ministers). This statement, made at the Zondo commission, stands in direct contradiction to earlier testimony given by Nene in which he said he met the Guptas only in the public arena.
The initial selling reaction demonstrates caution on the part of investors who expect another round of political risk; once again highlighting a strong price elasticity between the ZAR and the ministry of finance. These developments may have also damaged the “Ramaphosian” picture of ethical reliability.
With Moody’s set to review its rating this Friday, a Nene departure is sure to shackle any investor positivity towards an economy in recession.
Going forward into the week the local currency is expected to trade in a range of between R14.78 and R14.99 to the greenback, with a risk of moving well above the R15 level should Nene leave office or be sacked.
| When | What’s happening | Why it’s important |
| Wednesday 10 October | SACCIS Business Confidence | This an index that measures business confidence. Business confidence is forecasted to decrease and results outside of this expectation may move markets in a directly proportional direction. |
| Thursday 11 October | Manufacturing Production YoY and QoQ | The Mineral Energy Complex is our number one driver of exports and as such this data is important. Better than expected performance means positive market movements and vice versa. Mining production is forecasted to decrease. |
| Friday 12 October | Consumer Confidence Q3 | Consumer confidence measured as an index reflects the sentiment of South Africans towards the SA economy. There is a positive relationship between this index and currency performance. |
– John-Edward Ferreira
