The rand has strengthened as financial markets calmed down yesterday following last week’s fears that President Cyril Ramaphosa could resign, while China’s reconsideration of its strict Covid-19 restrictions buoyed international markets.
The rand yesterday pulled back to R17.19 to the dollar during early trade, away from a near one-month low of R18 to the dollar hit on Thursday following speculation that Ramaphosa was considering resigning over accusations that he might have violated the Constitution.
The JSE All Share Index also traded more than 1% higher above the 75 000-level, mainly pushed up by tech stocks and financials.
Ramaphosa’s possible resignation rattled the markets, leaving investors jittery about the country’s economic policy and reform programme implemented by the Ramaphosa administration.
Speaking from an investment point of view, Old Mutual Wealth investment strategist Izak Odendaal yesterday said what mattered most was policy, not politics.
Odendaal said the one thing Ramaphosa has been criticised for consistently was the consensus-building approach that had considerably slowed down making key decisions and implementing them.
However, he said the benefit of this approach was that the policies of his administration should broadly remain in place if he was replaced, at least until the 2024 elections.
“Probably, the most important reform Ramaphosa instituted was deregulating the electricity market and allowing private generation. This genie is now firmly out of the bottle and will not be put back,” Odendaal said.
“An end to load shedding is in sight, not because Eskom has been fixed, but because private businesses and households – and a few municipalities–- can take matters into their own hands.”
Ramaphosa yesterday recused himself from the crucial meeting of the ANC national executive committee which was convened to discuss the report of the Section 89 Independent Panel implicating him to possible violation of his oath of office.
The independent panel appointed by Parliament last week found that Ramaphosa had to answer for the theft of $580 000 from his Phala-Phala game farm in 2020 that may not have been declared in his taxes.
As more analysts unpacked the report and expressed doubt over its strength to remove Ramaphosa, investors and the markets adopted a wait-and-see approach on whether Parliament would adopt the report today to begin impeachment processes.
Ramaphosa has instead challenged the allegations in the report against him, with his lawyers filing papers in the Constitutional Court on an urgent basis yesterday.
Investec chief economist Annabel Bishop said the rand gained as risks subsided slightly, but it was still substantially weaker than in the first quarter before the US Federal Reserve (Fed) started hiking interest rates.
Bishop said risks were still abound as the rand consequently remains above R17 to the greenback, and was unlikely to return to the R14.50/$1-mark it reached in the first quarter, as the Fed continues to signal further rate hikes in 2023.
“The currency has not retreated to levels before the release of the report, however, as concerns still centre on the president’s statement itself, along with some issues raised by the judges on the panel, and the increased domestic political risk has weakened the rand,” Bishop said.
“In addition, the rand’s continued partial recovery today was aided by China increasingly loosening its zero-tolerance stance against Covid-19 over the past weekend, reducing some of the fears about a harsher global economic slowdown than originally feared.”
Chinese authorities are set to ease their restrictions regarding Covid-19-related protocols this week following days of massive public demonstrations, boosting global expectations of a demand-driven recovery.
Brent crude oil prices have advanced to around $87.50 (R1 520) per barrel on prospects of a recovery in Chinese demand, as the world’s top crude importer has been signalling a softening stance in the fight against Covid-19.
This has lifted the outlook for growth and demand, with China’s health authorities easing testing requirements across major cities over the weekend.
On the supply side, OPEC+ decided to stick to their existing policy of reducing oil output by 2 million barrels a day from November through to 2023 to gauge the demand-supply dynamics better.
BUSINESS REPORT