South African politics vs the rand

Dealing in the rand should come with a ‘Government Health Warning’ and I fear the swings we have seen this week will continue, Adam Phillips of Umkhulu Consulting said on Wednesday following confirmation from deputy finance minister Mcebisi Jonas that the Guptas did offer him Nhlanhla Nene’s job.

“I should think Zuma, Moyane, the Hawks and the Guptas are more than slightly nervous tonight. The market desperately needs to rid itself of politically fired events and get back to basics. Is that not what Gordhan is trying to do? I think he is,” he told Fin24 in the wake of Jonas’ admission.

The rand recovered firmly to below R16/$ after hitting R16.24 against the greenback following Jonas dropping the long-awaited bomb that the Guptas indeed offered him Nene’s job ahead of 9/12.

Nene was unceremoniously axed as finance minister on December 9 last year and replaced by unknown MP David van Rooyen, a move that plunged the markets in turmoil, causing stock and bond investors to lose hundreds of billions of rands. Pravin Gordhan’s appointment in the position four days later helped calm the markets.

Jonas said in a statement on Wednesday he could no longer remain quiet about the Gupta family offering him the top job in the ministry.

“Members of the Gupta family offered me the position of Minister of Finance to replace then-Minister Nene,” he said.

“I rejected this out of hand. The basis of my rejection of their offer is that it makes a mockery of our hard earned democracy, the trust of our people and no one apart from the President of the Republic appoints ministers.”

Jonas said he wanted to place on record that he did not have any discussion with Duarte about the finance minister job.

“I am committed to good governance, abiding by the constitution of our country and being accountable to our people who repeatedly express their confidence and trust in us, election after election.

“It is this constant state of awareness and consciousness, drummed into most of us throughout our service in the national democratic revolution led by the ANC, that has provided us with the moral capital and tools to apply sound judgement to navigate challenges that emerge in the natural course of societal leadership.”

Reports surfaced at the weekend that Jonas was called to a meeting with the Guptas and offered the job two weeks before Nene was removed.

According to TreasuryOne Jonas’ admission added to the political risk plaguing the rand, which was struggling to move down from the R16.20/$-mark in an earlier session on Wednesday.

Economists believe Nene was abruptly removed from his post for political reasons, including his reluctance to fund the R1trn nuclear programme, his inquiry into the squandering of funds at the SABC and his ruling against SAA in negotiations with Airbus.

The rand breached the R16/$-level on Tuesday as a barrage of factors, including domestic political turmoil stemming from a spat between Gordhan and the Hawks, put pressure on the local unit.

Phillips said there is no doubt that the ZAR is swinging on political events.

He told Fin24 there were some nervous offshore players continuing to sell the rand above 16.20 around lunchtime. An unsubstantiated rumour of a shooting at a mine helped cause more worry.

The unit, however, came off below 16.20 on the back of a slightly better oil price and operators trying to square up in front of the Fed meeting.

“However, at about 5.30pm the ANC came out with some statements regarding allegations around the Gupta family and made it clear that the state will be protected against an individual trying to destroy the credibility of the country. It looks like a further meeting is going to take place over the weekend.

“We had been waiting for Luthuli House to say something all day. This created a good reversal in the ZAR with USD longs trying to get out. Even just under 16.00 it could be worth selling some after what has been said.”

“Brent crude is back over $40 a barrel, emerging market and commodity currencies are all coming back strong,” said TreasuryOne.

TreasuryOne said in an earlier note that all emerging market currencies had been under pressure on Wednesday ahead of the FOMC meeting in the US. “The uncertainty regarding Finance Minister Pravin Gordhan and what ratings agency Moody’s will say after arriving in SA today, also keeps weighing on the ZAR.

“We have seen the USDZAR move from R15.94 this morning to test R16.20’s. We will need to see what happens in the US tonight and also what will happen with the local MPC tomorrow. For now the trend seems to be your friend,” said TreasuryOne.

The Guptas meanwhile challenged Jonas to provide a full account of the supposed meeting that took place, under oath, in a court of law.

“These latest allegations are just more political point scoring between rival factions within the ANC. To be clear: any suggestion that the Gupta family or any of our representatives or associates have offered anyone a job in government is totally false,” a Gupta family spokesperson said in an emailed statement.

Phillips said President Jacob Zuma will also have to face his Waterloo at the weekend. “Remember we have a long weekend coming up. What the ANC discuss could surface when the local market opens on Tuesday.”


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South African politics vs the rand