Rand continues to push fresh highs against the dollar ahead of SONA
The rand continued its march against the dollar on Friday ahead of Cyril Ramaphosa’s maiden State of the Nation Address (SONA) on Friday.
Ramaphosa was sworn in as president on Thursday after Jacob Zuma resigned amid pressure from the ruling African National Congress.
Sentiment has improved dramatically since Ramaphosa took centre stage back in December, with the rand currently trading at its best levels since 2015. In trade on Friday, the local united
- Dollar/Rand: R11.57 (-0.42%)
- Pound/Rand: R16.34 (-0.15%)
- Euro/Rand: R14.52 (0.09%)
At the start of Zuma’s second term as president in 2014, the rand traded at around R10.50 against the US dollar. And two days after his resignation, the currency continues to push fresh highs – just over R1.00 away from reversing the trends seen over the past four years.
David Shapiro of Sasfin Wealth said that R12.50 against the greenback “is probably the most comfortable level for the economy”.
In a statement released on Thursday afternoon, ratings agency Standard & Poor’s said that the new leadership could bring confidence and faster implementation of key reforms already undertaken.
“However, Mr.Ramaphosa and his administration will require time to design and implement measures to improve economic growth and stabilize public finances, given the structural and institutional challenges that South Africa faces,” it said.
“Economic growth remains low, impeding the path to fiscal consolidation. We think the government will attempt to introduce offsetting measures in an effort to improve budgetary outcomes, but these may not be sufficient to stabilize public finances in the near term.”
Bloomberg wrote that at the outset, Ramaphosa needs to signal a decisive change of direction. And for thatd he will need a strong cabinet.
“Government authorities have moved to detain several of those caught up in Zuma’s corruption scandals. To restore public confidence, Ramaphosa needs new leaders for the justice system, beginning at the National Prosecuting Authority (whose head, chosen by Zuma, was removed by the South African High Court).
“At least a half-dozen ministers in the current cabinet have also been tainted by mismanagement or allegations of questionable dealings.
“Reviving economic growth, projected at only 1.4% this year, should be a top priority. A budget is due on Feb. 21. It should affirm the new government’s commitment to fiscal discipline, otherwise another costly downgrade of South Africa’s credit rating will follow. Economic policy needs to be more steady and consistent. State companies need better management and closer oversight – and, with those in place, more investment. Repairing the education system will take much longer, but cannot be shirked if the country is to thrive as it should.”
Read: South Africa is R1 away from undoing Jacob Zuma’s entire second term as president
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