{"id":232895,"date":"2018-03-20T08:20:23","date_gmt":"2018-03-20T06:20:23","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=232895"},"modified":"2018-03-20T08:40:12","modified_gmt":"2018-03-20T06:40:12","slug":"rand-slips-to-lowest-point-in-over-a-month","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/232895\/rand-slips-to-lowest-point-in-over-a-month\/","title":{"rendered":"Rand slips to lowest point in over a month"},"content":{"rendered":"

South Africa’s rand slipped to its weakest in more than a month on Monday (19 March) as a broad sell-off of emerging markets triggered by an impending US Federal Reserve meeting and fears of a global trade war added to worries about a ratings review this week.<\/p>\n

Despite the early jitters, analysts believe that\u00a0South Africa will probably escape a junk assessment from Moody\u2019s Investors Service on Friday, in the first such verdict on the country\u2019s creditworthiness since Cyril Ramaphosa came to power.<\/p>\n

The change in leadership last month from the troubled era of Jacob Zuma will allow Africa\u2019s most-industrialised economy to cling on to the only major investment-grade rating it has left, according to all 15 respondents in a Bloomberg<\/a> <\/strong>survey of economists and analysts.<\/p>\n

The rand has rallied and business confidence rebounded since Ramaphosa succeeded Zuma as head of the ruling African National Congress and president.<\/p>\n

Although the\u00a0risk of missing budget targets and economic growth stumbling, and the ANC\u2019s move to pursue expropriation without compensation may still jeopardize South Africa\u2019s credit ratings.<\/p>\n

A move to junk on the rand debt would see the nation fall out of gauges including Citigroup’s World Government Bond Index, risking outflows of as much as R100 billion..<\/p>\n

“We expect the ratings agency to wait to evaluate fiscal performance and policy actions at this time, with any fiscal slippage or populist measures potentially triggering a revisit and potential downgrade later in the year,” IHS Global Insight director Bryan Plamondon said by email.<\/p>\n

Moody\u2019s put South Africa\u2019s foreign- and local-currency ratings on review for a downgrade to junk in November, and is scheduled to make an announcement on Friday. The company currently assesses the country at one step above speculative grade on both criteria.<\/p>\n

Lawmakers have started the process of changing the constitution to allow the government to expropriate property without paying for it.<\/p>\n

While Ramaphosa said this will not be done at the expense of the economy or food production, the main opposition Democratic Alliance and farmers\u2019 groups say it will deter investment.<\/p>\n

That, and economic growth that underperforms, remain risks, according to Elize Kruger, an economist at NKC African Economics.<\/p>\n

“A disappointment on the actual growth outcome could definitely be credit negative,” she said by phone.<\/p>\n

“If we go south on the whole land expropriation resolution and we lose the investor confidence again on this and the rand slides and so on, we could definitely move backwards on the ratings story.”<\/p>\n

A downgrade to junk by Moody\u2019s will knock the optimism that\u2019s boosted confidence and raised hopes that economic growth can exceed forecasts this year and next.<\/p>\n

S&P Global Ratings and Fitch Ratings both cut South Africa\u2019s local – and foreign currency debt to junk last year.<\/p>\n

Falling out of gauges such as the Citigroup one could raise borrowing costs as a time when the nation plans to tap international markets for as much as $3 billion.<\/p>\n

“Cyril Ramaphosa\u2019s rise to the presidency is a big boost to confidence and it will help us, but the land expropriation issue may become a big deterrent,” Kimon Boyiatjis, chief investment officer at Trident Capital Ltd. in Cape Town, said by phone.<\/p>\n

“It\u2019s one thing to appoint someone in government who is more credible than his predecessor, but he now has to walk the walk.”<\/p>\n

In morning trade on Tuesday, the rand continued to reflect these jitters in the market ahead of the Moody\u2019s announcement.<\/p>\n