Where Next For The South African Rand Amid Further Political Turmoil?

The South African rand has been one of the best performing currencies globally in 2018, but there’s a risk that political turmoil gets in the way. We look at the technical outlook for the rand.

However, markets have been mostly suggestive of the possibility of the South African president being recalled by the ANC, with initiatives thereto being led by Cyril Ramaphosa. After multiple meetings with the president, it would appear that Jacob Zuma remains reluctant to stepping down and it has been suggested that he is looking at trying to obtain immunity against allegations of corruption for him and his family before relinquishing his throne. However, news that Jacob Zuma’s State of the Nation Address (SONA) has been postponed in the 11th hour, has furthered the assumptions that his near-term departure may be imminent. The president of South Africa faces a vote of no confidence on the 22nd of February led by the opposition party, the Economic Freedom Fighters. With a factional divide in the ANC, this vote on the presidents future has a higher probability than previous votes have had in terms of resulting in his removal. ANC credibility will be on the line if opposition parties are the ones to initiate the president’s departure and the leading political party would be concerned about its effect on the 2019 presidential elections. With this in mind, it would appear that the ANC might increase its efforts to recall Jacob Zuma before the vote of no confidence on the 22nd of February.

South African political turmoil

The South African rand has been among the best performing currencies globally since December last year. The initial domestic catalyst for rand strength was the election of new African National Congress (ANC) president, Cyril Ramaphosa. The new president of the leading political party in South Africa has inspired business confidence, with his pledges to tackle corruption within the country as well as his proven business savvy. In his brief stint as the political head of the ANC, we have already seen action being taken within ailing state-owned power utility, Eskom, with a massive board reshuffle as well as active investigations into state capture reports.