The rand weakened slightly to R15,92/US$ at 9.55am ahead of President Jacob Zuma’s state of the nation speech on Thursday, which will be watched closely by local investors hoping for a sign that the country can stave off a credit rating downgrade to “junk status”.
“While foreign investors remain convinced the downgrade is inevitable, local investors are hoping for at least the right noises from the president, if not even some sort of white rabbit such as a move towards privatisation to generate much-needed funds,” Deon Kohlmeyer, an economist at Rand Merchant Bank, said in a note on Thursday.
“Many South Africans will watch the speech to try and gauge what South Africa’s political future looks like, some will watch hoping to re-live previous chaotic scenes in parliament, with the police and parliamentarians fighting it out,” he said.
“But the markets will be watching for some signs of hope that all is not yet lost and the doom and gloom of the looming downgrade of South Africa may yet be avoided.”
There have been positive signs by finance minister Pravin Gordhan, Deputy President Cyril Ramaphosa and Zuma, who have met a host of business leaders recently to find a way forward.
Independent treasury specialist to corporates, Adam Phillips of Umkhulu Consulting, said the rand is “really having a good week and managed to get down to R15,80/$ yesterday, helped by a better bond market and nervousness in the dollar”.
He said it will be interesting to see if Zuma has changed the content of his speech since the Constitutional Court session on Tuesday, while people will be watching to see if the Economic Freedom Fighters will disrupt parliament like last year.
He noted that while mining and manufacturing data will be released by Statistics South Africa on Thursday, “the economic data is thin on the ground in the rest of the world today”.
BizNews editor Alec Hogg cautioned those who expect Zuma to surprise on the upside in the address. “Short of tendering his resignation, Zuma simply doesn’t have the capacity to inspire his depressed fellow citizens,” he said in his Thursday newsletter.
“The King of Nkandla is a charming man and riveting raconteur who sacrificed much for the struggle. But he lacks intellectual curiosity and reads little, hence lacks the basic tools to lead a complex, modern economy,” he said.
“As a result, repeatedly flashing warnings get ignored or rubbished. Like those rigorously researched reports from the IMF, World Bank, WEF, ratings agencies and even our own National Development Plan, which lie in lonely corners of the presidency gathering dust,” he said.
“Without deep reflection on these realities, it is unrealistic to expect anyone to realistically appraise the parlous state of the nation.” — Fin24
