World leader warns South Africa risks invasion, and Rand heading for more pain
The rand began the week significantly weaker as investors, shaken by surging oil prices and their potential impact on global inflation and growth, sold off risk assets and took profits on some of their best-performing trades.
The rand traded at 16.85 per US dollar on Monday, down 2% from its previous close and at its weakest level since mid-December.
South Africa’s benchmark 2035 government bond also weakened in early trading, with yields rising 1.5 basis points to 8.505%.
Crude oil prices jumped more than 25% as the ongoing US-Israeli conflict with Iran prompted major Middle Eastern oil producers to cut supplies due to fears of prolonged disruptions to shipping through the Strait of Hormuz.
Analysts expect the rand to remain weak as increasing global risk aversion and higher oil prices negatively affect South Africa, a net importer of energy.
The SARB’s governor indicated last week that the bank will revise its risk scenarios ahead of its next policy meeting, as the ongoing Middle East conflict continues to drive oil prices higher.
The bank is scheduled to announce its interest rate decision on 26 March, after maintaining its main lending rate at 6.75% in a split vote in January.
At that time, policymakers stated they wanted to see a further easing in inflation expectations.
On the Johannesburg Stock Exchange, the Top-40 index was down 0.6% in early trading.
Domestically focused investors will be looking to the country’s statistics agency for the release of fourth-quarter gross domestic product data, along with January figures for mining and manufacturing, for insights into the health of South Africa’s economy.
As of Tuesday, 10 March, the rand is trading at R16.37 to the dollar, R21.97 to the pound, and R19.01 to the euro. Gold is currently valued at $5,163.77 per ounce, while oil prices have risen to $94.45 per barrel.
5 important things happening in South Africa today
South Africa risks invasion: Brazilian President Luiz Inacio Lula da Silva warned President Cyril Ramaphosa to enhance defence cooperation, highlighting both countries’ vulnerabilities to foreign invasion. Ramaphosa acknowledged Brazil’s advancements in defence and aviation and expressed a mutual desire to learn from one another. [eNCA]
Rand heading for more pain: The rand could weaken to R17.63/$ this year if the US-Israel-Iran conflict persists for 6 months, according to EY-Parthenon. [BusinessDay]
Petrol shortage warning: Fuel station owners and a source in the shipping industry have warned that South Africa could experience fuel shortages if the conflict in the Middle East does not de-escalate soon. [MyBroadband]
High Court blow to Eskom plans: Environmental organisations have filed a High Court challenge against the environmental approval for Eskom’s proposed 4,000MW Nuclear-1 power station at Duynefontein. They claim the approval breaches environmental laws and is based on outdated demand and cost assumptions. [News24]
Western Cape moving to eliminate potholes: The Western Cape has launched the Roads4U mobile app, allowing residents to report road maintenance issues like potholes, faulty traffic signals, and faded signage. Available on Apple and Android, it empowers users to report various infrastructure defects to fix issues faster. [TopAuto]
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