Rand Poised for Weekly Drop as Ruling Party's Leadership Meetsby
South African currency leads emerging-market declines Friday
ANC executive expected to debate President Zuma's future
The rand weakened against the dollar and headed for its first weekly decline in three before a meeting of the ruling party’s leadership that is expected to focus on the future of President Jacob Zuma and his links to an influential family.
The South African currency fell as much as 1.6 percent and was the second-worst performer among 24 emerging-market currencies tracked by Bloomberg. The rand was 0.7 percent weaker at 15.2742 per dollar by 5:27 p.m. in Johannesburg, bringing its slump in the past 12 months to 27 percent. Yields on government rand bonds due December 2026 rose 11 basis points to 9.27 percent. Local markets are closed Monday and March 25 for public holidays.
The key issue at the three-day meeting of ANC leadership is the role of the Guptas, a wealthy Indian family who’re friends with Zuma and are in business with his son. Two ANC officials have said the Guptas offered them ministerial posts in exchange for business concessions. Central bank Governor Lesetja Kganyago said Thursday that political developments are among factors affecting the rand.
“We have a fair amount of event risk as we go into the weekend,” Mohammed Nalla, head of strategic research at Nedbank Group Ltd., said by phone from Johannesburg. “The market’s reasonably nervous in terms of any potential outcome of the ANC National Executive Committee’s meeting, effectively taking positions off. We’re also going into a low-liquidity week next week with the two public holidays, so you might just be seeing some sort of position squaring coming through.”
Since taking office, Zuma’s tenure has been marred by corruption scandals, controversial appointments and policy missteps that critics say have stifled growth and investment and fueled public disenchantment. The current controversy exploded in December when Zuma’s decision to replace Finance Minister Nhlanhla Nene with a little-known lawmaker sparked a selloff of the rand and the nation’s bonds. Four days later, Zuma reappointed Pravin Gordhan to the post which he had held from 2009 to 2014, after coming under pressure from ANC and business leaders.
Deputy Finance Minister Mcebisi Jonas said Wednesday that the Guptas personally offered him Nene’s post. A day before, Vytjie Mentor, the chairwoman of parliament’s portfolio committee on public enterprises until 2010, said the Guptas proposed that she take the job of public enterprises minister, while Zuma was in their house.