Following the announcement that the ANC would officially back land expropriation without compensation, the beleaguered economy has taken another blow – just when it appeared as though things were settling down.
This is according to Wichard Cilliers, director and head of dealing at TreasuryONE, who said that while the the market was shaping up for a break below the R13.00 handle, the announcement by president Cyril Ramaphosa dealt the rand a blow, and in all likelihood the news will not be well received.
In a speech delivered on Tuesday evening, Ramaphosa said that the ANC would move ahead with a plan to change South Africa’s constitution to explicitly make mention of the party’s policy of land expropriation without compensation.
According to Ramaphosa, the constitution also makes provision for such an act, “in the public interest”, but public hearings on the topic showed there was strong demand for this to be made more explicit.
“This latest move is once again believed to be politically motivated ahead of the national elections next year and is aimed at neutering the political stance of the EFF,” Cilliers said.
“The dollar/rand responded immediately to the news and there is a high probability that it will likely weaken further. If communicated poorly this holds the potential of turning into a game changer depending on how seriously foreigners view this threat to property rights more generally,” he said.
He added that the US will also have a part to play in the short-term, with the Federal Open Market Committee (FOMC) expected to give its latest rate announcement later today. Cilliers said that he expected the rand to test the R13.40 level over the course of the day.
The rand was firmer against major global currencies on Tuesday afternoon, bolstered by a trade surplus that was much better than expected. It reached an intra-day best of R13.07 to the dollar, on track for its strongest monthly performance against the greenback since December.
On Wednesday, however, the rand erased gains against the dollar after Ramaphosa’s announcement, and was weaker at R13.30 at 09h20.