Finance

Rand rallies following Ramaphosa’s cabinet announcement

South Africa’s rand extended a post-election rally after President Cyril Ramaphosa announced a new cabinet that he said would prioritize rapid and sustainable growth.

The currency led gains among emerging-market peers on Monday, advancing 1.1% to 17.98 per dollar as of 9 a.m. in Johannesburg. The yield on benchmark bonds fell 14 basis points to 11.24%, heading toward April 2023 lows. 

Analysts at Rand Merchant Bank said Ramaphosa’s retention of Enoch Godongwana as Finance Minister was particularly significant for domestic markets.

They said the reappointment signals a continuation of a prudent fiscal approach and adherence to projections outlined in the February budget and medium-term expenditure framework.

The analysts added that momentum indicators suggest further rand appreciation is likely this week, and they predicted the rand would move toward 17.90 per dollar.

Ramaphosa also included members of the Democratic Alliance – considered business-friendly by investors – in his cabinet, with leader John Steenhuisen named agriculture minister.

The coalition government was formed after the African National Congress lost its parliamentary majority.

Politics have whipsawed the rand over the past month. 

The currency weakened toward 19 when it became clear that the ANC would lose more support than initially expected in the May 29 vote. It then rallied below 18 in mid-June after a government of national unity was announced, which excluded left-learning parties whose policy proposals had made investors nervous.

The rand then began to weaken again as investors awaited news on which parties would secure which positions in the cabinet.

Overall, though, the rand, as well as South African stocks and bonds, have benefitted from the vote.

The rand is one of only two major emerging-market currencies to gain against the dollar this year, with the other being the Russian ruble. South Africa’s benchmark stock index also rose to a record high in the aftermath of the vote.

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