load shedding eskom rand

Photo: Pixabay

Malusi Gigaba’s Mid-Term Budget Speech sees rand take a tumble

You don’t have to be an economist to put two and two together on this one

load shedding eskom rand

Photo: Pixabay

Malusi Gigaba’s conservative Budget Speech may have been an exercise in carefully-exercised caution, but it did nothing to bolster the rand

South Africa’s currency took a noticeable tumble on Wednesday afternoon, and it did so before Gigaba had even started speaking. That’s not the greatest sign of confidence, is it?

Rand trading to the Dollar

Around 14:15, there was a 4-cent shaving off of the rand, as the EFF’s antics saw them kicked out of Parliament early. This was before Gigaba had even opened his mouth.

By 14:45, as Malusi was still presenting his Mid Term Budget, the rand fell a further 12c to the dollar within 15 minutes, sliding down to R13.9941.

At 15:15, the rand hit its lowest level before plateauing – R13.9152.

Bond prices in SA also saw a fall, as indicated by Yield movements. When yields rise, bond prices fall. So the jump from 8.9% to 9.07% represented a major change in that market.

What did Gigaba say?

The Finance Minister didn’t particularly push the boat out, or make any huge financial committments. He looks like he’s saving that for his Budget Speech for the year of 2018 coming up in Ferbuary.

However, it seems growth projections and sluggish economic recovery were enough to wobble the rand: Gigaba addressed this issue at the beginning of his speech:

Honourable Speaker, we have had to revise economic growth projections downwards from 1.3 per cent as tabled at the time of the budget to 0.7 per cent for 2017.Growth is subsequently expected to increase slowly reaching 1.9 per cent in 2020.

This trend assumes that the status quo prevails.Therefore, we have the power to change our course; the political, social and economic agency to chart a new path.

These figures are just the immediate, early projections however. We won’t know how profound the impact of the Mid Term Budget Speech will be until later this week, when the market has had time to stabilise.

Perhaps there’s a modicum of sympathy for MG, though? If the rand starts decreasing before you’ve even spoke, the odds aren’t exactly favourable for you.