South Africa's Rand Rallies as Investors Sniff Zuma's `Decline'by
Deputy Finance Minister's statement undermining president
Dollar bonds pare losses as pressure mounts for Zuma's recall
The rand rallied after South Africa’s Deputy Finance Minister Mcebisi Jonas said President Jacob Zuma’s family friends, the Guptas, personally offered to have him appointed as finance minister, an allegation that may undermine the president’s power.
The currency was 0.4 percent weaker at 15.9919 per dollar by 7:25 p.m. in Johannesburg after slumping as much as 2 percent earlier. Jonas’ statement was the latest in a series of embarrassing revelations linked to Zuma, with his ruling African National Congress party saying it took the allegations very seriously and that it would take action. A former ANC treasurer, Matthews Phosa, called on the party to “discuss Zuma’s future.”
Jonas’ revelation “pretty much states what we all know and believe -- that the Guptas have compromised our cabinet,” Warrick Butler, head of emerging-market spot trading at Standard Bank Group Ltd., Africa’s biggest rand trader, said by e-mail. “The latest comments from Matthews Phosa plus the realization that we may be seeing the terminal decline of the president is possibly driving the rand” stronger, he said.
Yields on South Africa’s dollar-denominated bonds due Sept. 2025 dropped 5 basis points to 5.23 percent after trading as high as 5.28 amid investor concern that a feud between Finance Minister Pravin Gordhan and a police unit investigating the tax authority will undermine stability at the National Treasury. The dispute raised concern that Gordhan won’t have the political backing to push through austerity measures announced in his February budget.
The rand is still recovering from the market fallout in December when Zuma unexpectedly fired Nhlanhla Nene as finance minister in favor of a little-known lawmaker. The president backtracked four days later and reappointed Gordhan to a post he had held from 2009 until 2014. Jonas claimed he was offered Nene’s post and refused because he believed it would make a “mockery” of the nation’s constitution.
The Guptas are business associates of Zuma’s son, Duduzane, and have been linked with Zuma’s plan to spend as much as 1 trillion rand ($63 billion) on nuclear power stations in South Africa.
“Any suggestion that the Gupta family or any of our representatives or associates have offered anyone a job in government is totally false,” the family said in an e-mailed statement.