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Dec 12 2008

Enter the new rand-killer

Published by at 3:11 pm under Opinion,Top Stories

A year has passed since I suggested politics would start asserting downward pressure on the SA rand. Since then the rand has weakened by about 30% – mostly due to the financial markets crisis. The political factor hasn’t really come into play yet. But, I expect it to start happening soon. And I have friends in high places to back me up, such as the Economist Intelligence Unit (EIU).

Look here and you’ll see the EIU doesn’t quite believe SA finance minister Trevor Manuel when he says “there will be no jump to the left” in the post-Mbeki era.

Instead, the EIU reckons: The stage is set for a clash within the government between a powerful Treasury minister, Trevor Manuel, and an increasingly militant and confident left. This could well see Mr Manuel retire from politics in 2009 rather than risk staying at a shrunken Treasury**. Then, business lobbies may be less confident in their assertions that there will be no shift to the left in economic policy. 

**With shrunken Treasury the EIU has the following in mind: A new body in the Office of the State President gets the task of determining state spending priorities and allocating money to spending authorities (just short of drawing up the Budget). In other words, this task is taken away from the minister of finance and his department.  

Should this scenario (including the resignation of Manuel) materialise, the hunting season on the rand will be open. 

At the time of writing this, the rand had moved to R13.59 to the Euro – without the “help” of the political factor. The next two months could turn out interesting, in the old Chinese proverb sense of the word.

2 responses so far

2 Responses to “Enter the new rand-killer”

  1. adminon 15 Dec 2008 at 10:44 pm

    Just read this article on Fin24 now, written by a chartist. After a very comprehensive and complicated argument he came to the following conclusion (last two sentences of his long article):

    “This probably confirms our outlook for the 55 cycle to turn on January 6 2009 and mark the beginning of a rapidly weakening rand. The rand is, according to us, one of the biggest threats we will have to face in South Africa for 2009. It has the potential to shatter every expectation you have for further easing of interest rates.”

    Quite amazing how an extreme-gut-feeler, like me, and an extreme-techie, like this guy, end up with the same, broad, fuzzy view, namely: The rand is facing a tough time.

  2. Christoon 14 Jan 2009 at 9:49 am

    14/1/2009

    Rand Merchant Bank’s forex researcher made the following statements today. They back the above-mentioned view up (that the rand might be in for another beating this year).

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