South Africa’s rand headed for its biggest weekly slide since 2015 and bonds plunged, after the firing on Thursday of finance minister Pravin Gordhan raised concerns about the nation’s fiscal path and its investment-grade credit rating.
The rand dropped 1.3 percent to 13.4548 per US dollar as of 8:31am yesterday in Johannesburg, the lowest in seven weeks.
The currency was falling for a fifth day, the longest losing streak since August last year.
Photo: AP
Benchmark 10-year government bonds tumbled the most in seven months, sending the yield soaring by 42 basis points to 8.93 percent.
The rand was one of the top three emerging-market currencies last year and early this year, but politics is again casting a cloud over the nation’s assets.
Gordhan had fended off a downgrade in South Africa’s rating to junk, and his commitment to curb spending and government debt had endeared him to investors.
He clashed with South African President Jacob Zuma over the affordability of building nuclear power plants and the management of state-owned companies.
“Market reaction to the Cabinet reshuffle and what looks to have been a clean sweep of the Treasury top team is going to be a significant negative,” Razia Khan, chief Africa economist at Standard Chartered PLC, said in an e-mail. “Given past volatility in the rand when a Cabinet reshuffle was even suggested, the expectation is that the impact may be more pronounced now.”
Zuma replaced Gordhan with Minister of Home Affairs Malusi Gigaba, the presidency said in a statement yesterday.
African National Congress (ANC) lawmaker Sfiso Buthelezi took over from Gordhan’s deputy, Mcebisi Jonas.
A group of the nation’s leading chief executives said that Gordhan’s dismissal would have severe consequences for the economy and was a setback to the work done to avoid a credit ratings downgrade.
South Africa’s Banking Association said that changing the finance minister and deputy finance minister raised “alarming concerns” over fiscal discipline.
ANC General Secretary Gwede Mantashe also said in a radio interview that the process followed to axe Gordhan and eight other ministers made him “jittery and uncomfortable.”
Moreover, ANC ally the South African Communist Party said that the firing of Gordhan risked triggering the looting of the Treasury.
The rand was heading for a 7.6 percent loss for the week — the worst such performance since the last time Zuma rocked markets by firing his finance minister.
Back in December 2015, it was Nhlanhla Nene’s ouster that hurt confidence — an episode that ended with Zuma bringing back the respected Gordhan to office.
Politics aside, the generally positive environment for emerging markets — and synchronous pickup in global economic growth — should favor South Africa, with its mining assets.
Its currency enjoyed a 12.6 percent jump against the US dollar last year — behind only Brazil’s real and Russia’s ruble among emerging markets, according to data compiled by Bloomberg.
“The annoying, frustrating thing from the South Africa perspective is that you don’t want political worries now, because things are trending up, things are picking up,” Moz Afzal, global chief investment officer at EFG Asset Management, said in an interview in Singapore.
“South Africa is pretty much in the penalty box” for investors now, he said.
Zuma’s office said the new ministers and deputy ministers were to be sworn in at 4pm GMT yesterday.
Additional reporting by Reuters
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last