During Tito Mboweni’s 60-minute Mid-term budget speech, the rand value nosedived b 2.5% on Wednesday afternoon. The Finance Minister, given the unenviable task of balancing South Africa’s books, failed to give too many concrete details on Eskom’s debt relief and interventions on the unemployment crisis.
Mid-term budget speech creates a “shock-market”
Things got off to a shaky start, as the R15 : $1 barrier was swiftly approached…
Tito Mboweni speach has already taken Rand to R14.85 against Dollar from R14:60 ??♂️??♂️??♂️??♂️
— Starona (@RTisane) October 30, 2019
Why has the rand value dropped on Wednesday 30 October
With joblessness at an 11-year high and the Moody’s credit rating decision set for Friday, the international markets are betting on South Africa dropping into junk status this week. The moment where Tito Mboweni could steady the ship never came, and according to economists, it’s obvious what spooked the rand value.
Ryk van Niekerk is a financial expert and the editor of MoneyWeb. He speculates that South Africa’s rising debt was the point of no return on Wednesday. Mboweni revealed that the national debt could top 80% of our GDP by the end of 2028 – a daunting prospect which reflects terribly on the current government.
— Ryk van Niekerk (@Ryk_van_Niekerk) October 30, 2019
US dollar to rand value and exchange rate for Wednesday 30 October
Sitting at R14.61 to the US Dollar before midday on Wednesday, the rand value began its free-fall shortly after 14:00. It took less than 90 minutes to reach R15.00 against its American counterpart. As of 15:37 SAST, ZAR’s worth against the greenback had plummeted by almost 40 cents.
The news is a devastating blow for the Ramaphosa Administration, who have been humiliated by recent figures which show a 20% decline in the rand value since Cyril became president in February 2018.
Lowlights of the Mid-term budget speech
We were expecting a tumultuous forecast, but this still feels like a gut-punch for the economy. Perhaps a sign of how stringent the ANC’s new financial policy will be is that no items were added to the “zero added tax” list. Last October, sanitary towels and flour saw their VAT charges slashed.
There were few signs of encouragement from the Mid-term budget speech, as South Africa’s economic growth was reduced to just 0.5% for 2019. That’s down from predictions of 1.5% earlier in the year. Meanwhile, there’s about R50 billion in tax revenue that hasn’t yet been collected.