Rand, banks plunge on cabinet uncertainty

South Africa’s currency fell the most in emerging markets Thursday, leading a selloff in the nation’s assets, amid growing anxiety over delays to the formation of President Cyril Ramaphosa’s cabinet.

The rand fell 0.8% to 18.36 per US dollar as of 11:45 a.m. in Johannesburg. That put it on course for the lowest close since June 14 and the worst performance among developing-nation peers this week.

South Africa’s benchmark sovereign bond yield jumped 12 basis points, the most in three weeks, and stocks dropped for a third day.

It’s been eight days since Ramaphosa was sworn in, and he still doesn’t have a functioning cabinet as talks drag between the African National Congress and the Democratic Alliance over its composition.

In 2019, when Ramaphosa had enjoyed a parliamentary majority, it took only five days.

Traders worry the delay this time might lead to a less desirable outcome from the markets’ perspective, even though the ANC said Wednesday an announcement would be made within 48 hours.

“There are two things in rand investors’ minds,” said Sebastien Barbe, the head of EM research at Credit Agricole CIB.

“The composition of the government is the foremost. Even if this ANC-DA alliance has been already priced in, DA having significant economic ministries could see some upside for the rand.”

Over the long term, South Africa’s Reserve Bank, hinting at possibly lowering the inflation target, suggested “possibly rates higher for longer – potentially rand supportive as well when it happens,” said Barbe.

Johannesburg’s benchmark stock index headed for the longest losing streak since June 11, led by banking stocks.