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Is it time to panic about the Rand?

by Andrew Rissik | Mar 29, 2017
  • The stage seemed to be set for a Rand recovery built on the back of yield-seeking international money market investors. But then President Jacob Zuma dropped a poorly timed bomb on us all on Monday. At the stroke of midnight on March 30 he dismissed both Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas along with several other cabinet ministers seen as disloyal. This news has rocked the Rand.
    Jacob Zuma, Pravin Gordhan and Jabu Mabuza. Picture: GCIS

    The effects of Zuma’s decision have already been felt as investors are voting with their feet, driving the Rand down. The ZAR has lost over 6% to the USD and over 5% to the GBP since Monday with losses looking like they will compound, quickly.

    Our president’s thoughtless order to recall the Finance Minister and his deputy from their international investor roadshow has all but wiped out the gains the ZAR had made over the last six weeks.

    Why is President Zuma making this play now?

    Having lost control of most of the municipal procurement budgets nationally, by way of losing all the big metros in last year’s elections, President Zuma took the bold step of taking charge of our ailing SOEs.

    The procurement process and other opportunities to plunder these organizations is what is needed to maintain the lifestyles to which he and his cronies have become accustomed. Raw power at its best….

    Treasury must sign off on the perpetual bail outs of these loss-making cash cows and this is  where the problem lies. It seems President Zuma simply cannot resist the thought of taking control of this pot of gold.

    Zuma needs control of the treasury in order to survive and he will try to do so at all costs. There is no better way to achieve this than by putting in a minister, in this case Malusi Gigaba, who has proven to be a Zuma loyalist through and through.

    The stunning choice of Gigaba has confounded analysts and sent shock waves through markets. It’s bizarre to think that, at this point many would have been happier, with Gordhan’s mooted replacement, Brian Molefe. A man forced into a tearful resignation last year when it was uncovered that he was under the yoke of the Guptas while he was in charge of Eskom. The politicis of The Republic never ceases to amaze.

    Stay calm, think with your head, look offshore

    The recent Rand rally will most likely become a distant memory in the near future. History will likely confirm that its run was built on speculation and opportunists seeking high yields in our money markets.

    The Rand was thus overvalued relative to its emerging market peers and was probably about fairly valued against the basket of so-called hard currencies.

    Now, with the latest political upheaval it could well be time for the embattled currency to swing the other way. As the fallout from Gordhangate develops, we will likely see a long run of Rand devaluation driven by the brazen, arrogant decisions made by the South African President in the last 24 hours.

    The Rand is currently still at a decent level and you’d do well to start moving your cash-based assets offshore to try weather this latest Rand storm. It may be be wise to sell some Rands and buy some hard currency at this point. If things do turn around in the medium term, one can always repatriate them as when it is prudent to do so.

    Things may be bad, but don’t let them get worse

    Get out your comfort zone and act now. Use the generous annual offshore investment allowances that the SARB have made available to private citizens while you still can. Who knows how long these will remain in place.


    Fill in the form on this page to get a quote today. You can also give us a call on +27 (0) 21 657 2153 or email saforex@sableinternational.com and we’ll help you move your Rands to where you need them.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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