Financial analysts are currently awaiting the results of South Africa’s national elections with bated breath, as the country recovers from a weaker rand, load shedding and high oil prices.
Speaking to CNBC Africa, Tsitsi Hatendi-Matika, head of Retail Investment Specialist at Absa’s Wealth and Investment Management, said that the rand is currently predicted to be on track for the R14/dollar mark after the elections.
However, she cautioned that this does not account for this week’s spike in oil prices.
“We know this oscillates between the high-end and the low-end but around these levels, we think it as fair value,” she said.
However, Hatendi-Matika said it was difficult to guess exactly which way the elections will turn out, as polls typically don’t account for the 8 million South Africans who opt not to vote.
In the event that elections provide an unexpected result – such as a president who doesn’t get the majority vote – the rand’s levels could differ dramatically, she said.
“We had a meeting about this last week and it was noted that ‘black swan events’ by their nature cannot be anticipated.
A black swan is an event or occurrence that deviates beyond what is normally expected of a situation and is extremely difficult to predict.
“Should things go extreme and not how the market expect them to go – you could see the rand head to R15 or even R16/dollar.”
High oil prices
South Africa is set to head into elections with the added burdened of high oil prices and a weaker rand.
Washington announced a new plan on Monday (22 April) to impose sanctions on countries that import Iranian oil by no longer granting exemptions, and effectively withdrawing from a 2015 agreement.
This sent international oil prices to their highest levels in 2019, with the spot price of Brent crude hitting just under $75 a barrel, and WTI at $65.70.
Hatendi-Matika said that in the short-term these high oil prices will feed into fuel price increases which will subsequently feed into food price increases.
Ultimately this may also have an impact on South African interest rates and could even result in job losses, she said.
Read: What shook the rand