ECONOMIC INSIGHTS
Junk Status
Is it Time to Panic About the Rand ?
BY ANDREW RISSIK
Just over a month ago , the stage seemed to be set for a Rand recovery built on the back of yield-seeking international money market investors . But at the stroke of midnight on 30 March , Jacob Zuma dismissed both Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas , along with several other cabinet ministers seen as disloyal . This news rocked the Rand and precipitated a downgrade by two of the major credit ratings agencies .
The effects of Zuma ’ s decision have already been felt as investors are voting with their feet , driving the Rand down . The ZAR has lost close to 10 % to the USD and over 8 % to the GBP . While the losses have not been as rapid as some had predicted , it does seem the Rand is set to depreciate steadily over the next year .
Our president ’ s thoughtless order to replace the Finance Minister and his deputy from their international investor roadshow has all but wiped out the gains the ZAR had made over the last six weeks .
Why is President Zuma making this play now ? Having lost control of most of the municipal procurement
budgets nationally , by way of losing all the big metros in last year ’ s elections , President Zuma took the bold step of taking charge of our ailing state owned enterprises .
The procurement process and other opportunities to plunder these organizations is what is needed to maintain the lifestyles to which he and his cronies have become accustomed . Raw power at its best .
Treasury must sign off on the perpetual bail outs of these loss-making cash cows and this is where the problem lies . It seems President Zuma simply cannot resist the thought of taking control of this pot of gold . Zuma needs control of the treasury in order to survive and he will do so at all costs . There is no better way to achieve this than by putting in a minister , in this case Malusi Gigaba , who has proven to be a Zuma loyalist through and through .
The stunning choice of Gigaba has confounded analysts and sent shock waves through markets . It ’ s bizarre to think that , at this point , many would have been happier with Gordhan ’ s mooted replacement , Brian Molefe . A man forced into a tearful resignation last year when it was uncovered that he was under the yoke of the
52 MAY 2017 SA Real Estate Investor www . reimag . co . za