Rand Leads World Currency Losses as Zuma Survives Ouster Vote
South Africa’s Rand Weakens as Zuma Survives No-Confidence Vote
(Bloomberg) -- The rand led declines among major currencies after South African President Jacob Zuma survived a bid by opposition lawmakers to oust him, crushing the prospect of new leadership reviving the country’s economy.
The South African currency dropped 1.2 percent to 13.3883 per dollar by 3:43 p.m. in New York. Yields on the country’s $2 billion of Eurobonds due October 2028 were little changed after the vote at 4.75 percent.
The ruling African National Congress defeated an eighth attempt in Parliament to remove Zuma, whose eight-year rule has been mired in allegations of corruption and mismanagement that weighed on investor sentiment, reduced the country’s credit ratings to junk and sent the economy into recession.
“While the outcome is in line with our and market expectations, the result still leaves room for disappointment as some had hoped that a vote of no-confidence would lead to a more credible government and the introduction of market-friendly reforms,” Trieu Pham, London-based emerging-markets credit strategy analyst at MUFG Securities, said via email. “Politics will remain in focus as we get closer to the ANC National Conference” in December, when the party will elect a new leader.
The motion was defeated by 198 votes to 177, Baleka Mbete, the speaker of the National Assembly, announced at a sitting in Cape Town. Nine of the 384 lawmakers present in the assembly, where the ANC has a 62 percent majority, abstained.
The opposition filed its latest motion of no-confidence in April after Zuma fired Pravin Gordhan as finance minister, a move that prompted two ratings companies to downgrade the nation’s debt to junk and sparked massive public protests. Thousands marched through the streets of Cape Town before the debate to demand Zuma’s removal, while others turned out to support him. Security personnel sealed off streets and erected barricades around the parliamentary complex. Anti-Zuma demonstrations also took place in Johannesburg and Pretoria.
Here’s what other analysts say about prospects for the rand:
- Zuma’s survival may maintain a political risk premium, keeping the rand away from its “fair value” of about 12.00, according to Chris Turner, global head of strategy at ING Groep NV.
- The ZAR will probably trade within the 13.00/13.50 range
- The rand could decline to 14.00 per dollar by the end of 2017 amid all the political noise, according Capital Economics economist William Jackson.
- Zuma may face more ANC resistance than previously thought
- The ZAR still looks attractive with interest rates beyond 7 percent, despite some degree of political risk, according to Commerzbank AG strategists
--With assistance from Mike Cohen and Amogelang Mbatha
To contact the reporters on this story: Robert Brand in Cape Town at rbrand9@bloomberg.net, Maria Jose Valero in New York at mvalero3@bloomberg.net.
To contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Rita Nazareth at rnazareth@bloomberg.net, John Viljoen