The South African rand buckled on Thursday (1 December) following findings from parliament’s section 89 panel that there is prima facie evidence that president Cyril Ramaphosa violated sections of the country’s Constitution.
The rand tanked 3% from R16.90 on Wednesday to R17.43 on Thursday as markets digested the findings and the implications for South Africa.
The independent panel appointed by parliament to investigate the President’s Phala Phala saga has recommended a full investigation as it believes Ramaphosa may have broken anti-corruption laws and violated the constitution.
Ramaphosa is now facing possible removal from his job just weeks before the ANC’s elective conference.
“The political crisis has weighed heavily on the rand, which fell to nearly after the news broke last night,” said TrasuryOne.
The rand closed at R17.17 on Wednesday after trading at R16.90 earlier in the day. Meanwhile, the local unit is sharply weaker against the euro and the pound.
According to TreasuryOne, this decline is in sharp contrast to the rand’s emerging market peers, which are trading stronger on the back of a less hawkish US Fed and positive news out of China around Covid.
“(Fed chair) Jerome Powell last night said that the Fed is open to moderating the pace of rate hikes as early as this month which has boosted risk sentiment,” the group said.
As a result, the dollar has slipped, which would have further boosted rand had it not been for the developments around Ramaphosa.
At the same time, the positive risk sentiment also got a boost from news that Chinese health authorities have found the new strains of Covid to have mild symptoms, raising the hopes of further relaxing of Covid restrictions, TreasuryOne said.
At 11h30, the rand was trading at the following levels:
- ZAR/USD: R17.31
- ZAR/EUR: R21.03
- ZAR/GBP: R18.11
Ramaphosa in peril
The section 89 findings have placed president Ramaphosa in a perilous position. While he maintained his innocence and denies any wrongdoing, opposition parties and his political opponents within the ANC are baying for his blood.
The ANC’s National Executive Committee (NEC) called an emergency meeting to be held on Thursday evening to discuss the findings that there may be a case for Ramaphosa’s impeachment.
In the meantime, the president has called off or postponed any public-facing addresses, including a planned media briefing held weekly by his spokesperson and an appearance before the National Council of Provinces for a Q&A session.
According to Bloomberg, two NEC members who are close to Ramaphosa expressed concern that the president may opt to resign — a replay of what happened in June when the scandal over the game farm theft first erupted, and he took advice on whether or not he should quit.
Under party rules, members facing criminal charges must step aside from their roles to allow legal processes to unfold.
While Ramaphosa hasn’t been charged — and on Wednesday reiterated his denial of any wrongdoing — there may be instances in which the party’s integrity body may ask officials facing allegations of wrongdoing to step down, Treasurer-General Paul Mashatile said in an interview on Tuesday.
Opposition parties, including the DA, the EFF and UDM, have called on the president to resign, while his main opponent in the ANC during the 2017 elective conference, Nkosazana Dlamini-Zuma, also said he should stand aside.