South Africa’s Rand rally hits a wall amid Ramaphosa policy fears

by | 2 Mar, 2018

The rally in South Africa’s currency has evaporated as investors worry about its new leader and his plans for the future.

The prospect of regime change in South Africa was cheered by investors. Since December 1, the Rand delivered total returns of nearly 18 per cent, which has made it one of the best-performing emerging market currencies over that period.

Cyril Ramaphosa (pictured) represents a fresh start for many after Jacob Zuma, but unfortunately for the Rand, the first significant policy change he has backed is the expropriation of land from white farmers without compensation.

The populist policy is seen as an overture to the more radical EFF party, whose leader Julius Malema called for the government to forcibly remove the “criminals who stole our land” in reference to European settlers.

This will likely scare foreign investors who fear political risks. A 2017 government report found that white people owned 72 percent of the nations farmland, and the worry is that by forcing them out, the country could see a collapse in crop production similar to Zimbabwe, which turned from the ‘bread basket of Africa’ to a basket case thanks to similar policies from Robert Mugabe, whereby

Ramaphosa has vowed to avoid anything that would harm efforts to boost employment and reduce inequality, but given that agriculture was one of the only sectors that provided growth to an otherwise ailing economy last year, he must tread very carefully. The country may face the prospect of further downgrades to its credit rating from major agencies including Moody’s unless reforms are enacted swiftly.

The Invstr chart displays the weaker performance for the Rand against the Dollar since late February

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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