News24 | Stable politics buoying rand, says Godongwana

Minister of Finance Enoch Godongwana. (Jeffrey Abrahams/Gallo Images)

• The swift formation of a new coalition government has bolstered investor confidence and fuelled the rand rally, says Godongwana.
• The local currency rallied 3.7% against the dollar since President Cyril Ramaphosa announced a new cabinet in June.
• The FTSE/JSE All Share Index has gained 6.6% over the same period.
• For more financial news, go to theNews24 Business front page.

The swift formation of a new coalition government in South Africa after May elections has bolstered investor confidence and fuelled a rally in the nation’s currency and the stock market, Finance Minister Enoch Godongwana said.

“The markets were looking for stability and the formation of the government of national unity in a very short period gave that stability,” Godongwana said in an interview on the sidelines of the New Development Bank’s annual general meeting in Cape Town.

“This meant that the rand and South African equities benefited from this political stability created in a very short time.”

The 29 May vote saw the African National Congress lose its parliamentary majority for the first time since in took power in the nation’s first multiracial elections in 1994. It entered into an alliance with nine other mostly business-friendly parties to retain power within a month, and they agreed that growing the economy would be the new administration’s top priority.

The rand has rallied 3.7% against the dollar since President Cyril Ramaphosa announced his new cabinet on 29 June, the most of any African currency, while the FTSE/JSE All Share Index has gained 6.6% over the same period.

READ| BRICS bank approves R18bn loan for SA water and sanitation

Officials attending the meeting of the NDB, which was established in 2015 by the BRICS group of developing market nations, haven’t taken any decision on whether they should introduce a common digital currency despite calls from within the bloc to do so, according to Godongwana.

“The Russians are very keen on digital currencies, but they have recognised there needs to be a transition. All central banks around the work are discussing digital currencies and how to regulate them,” he told reporters. “There are ongoing discussions about a common payment system. It is complex issue.”

The term “BRIC” was coined in 2001 by economist Jim O’Neill, then at Goldman Sachs Group, to draw attention to strong economic growth rates in Brazil, Russia, India and China. The leaders of the four nations first met as a collective in 2009 and South Africa was invited to join their ranks the following year.

Membership was extended to Iran, the United Arab Emirates, Ethiopia and Egypt on 1 January. Saudi Arabia was also announced as a new member, though the kingdom later said it was still studying the invitation to join.