The South African rand has taken a beating from a failed attempt to ouster President Jacob Zuma.
The rand weakened 0.64 percent against the dollar to 13.46 rand per US$, Wednesday, according to data tracked by BusinessDay and obtained from the Bloomberg Terminal.
The Rand was previously showing signs of strengthening on indications that President Zuma would be ousted, but the currency quickly lost all gains following the news that he had survived a ‘no confidence’ vote for the 8th time.
The decision to keep Zuma in power has increased the risk of eliminating Rand buyers from the market, according to Jameel Ahmad, vice president, market research at forex brokerage firm, FXTM.
“Following the news that Parliament has once again voted to offer President Zuma a lifeline, the risks on the Rand are pointing towards further downward pressure,” Ahmad said.
“This is due to the likelihood that ongoing political risk will continue to dominate the South African headlines,” Ahmad said in an August 9 note to clients.
Political turmoil has rocked Africa’s most industrialized nation which vies with Nigeria as the continent’s largest economy, since the surprise removal of respected Finance Minister, Pravin Gordhan, back in March.
“When one combines ongoing political risk, a technical recession and emerging concerns over potential political interference in the hallowed ground of monetary policy, it creates a picture that sellers will remain in control of the South African Rand,” Ahmad added.
Post Zuma’s survival, the rand has now gone from the best-performing major currency on Monday to posting the biggest loss among Eastern European and African currencies on Wednesday, according to Bloomberg data.
“The Zuma win is Rand negative,” said Rafiq Raji, the chief economist at Lagos-based advisory firm, Macroafricaintel.
“Besides, it (the rand) will continue to be sensitive to political noise till December when the ANC chooses its next leader,” Raji told BusinessDay.
The next presidential election is slated for 2019.
South Africa slipped into recession this year following two consecutive quarters of negative growth.
A series of downgrades in the credit ratings of South Africa has rode on the back of the deteriorating economy and particularly the country’s political turmoil.
Global ratings agency, Standard and Poor‘s said on Tuesday that the outcome of the vote of confidence in favour of Zuma will not impact the country’s downgrade-threatened credit rating.
“The situation remains within our base-case scenario which is desirable (for maintaining the current BB+ rating with a negative outlook),” S&P said in a note to clients.
Under Zuma’s watch, who has led the country since May 2009, unemployment has also risen to a 14-year high.
Zuma survived the no-confidence motion against him by winning 198 votes to the opposition’s 177 votes as African National Congress lawmakers rallied to his support, though some members did vote against him.
