By Hilary Mare
FOLLOWING the ANC National Executive Committee’s decision to reject the call for President Jacob Zuma to step down, the Rand has weakened causing further strain on the Namibian economy.
The Rand which opened at R13.73 to the US dollar on Tuesday breached the R14 mark by midday, surpassing the mark by end of day. In line with the weakening of the rand and the implications on Namibia, Purvance Heuer, director of research and securities at Simonis Storm Securities told Confidente that Namibia will continue to see a volatile rand until political uncertainty is resolved in neighbouring South Africa. “Namibian and SA effective have the same currency through the peg. Any movement in the ZAR affects the Namibian dollar directly. We shall continue to see a volatile ZAR until political uncertainty is resolved. Chances are that as long as Zuma is President in SA the ZAR will be volatile and as such Namibia will face an uncertain future with regard to inflation, interest rates and the trade balance. Given that Namibia is a regional neighbour that can also affect foreign direct investment in Namibia,” he stated. South Africa’s ruling African National Congress said on Tuesday its NEC had debated a call over the weekend for Zuma to step down but that the decision-making group had not supported the motion.
“The NEC did not support the call for the President to step down,” ANC secretary general Gwede Mantashe told a news conference. “This issue was debated openly, robustly and, as we said, sometimes it was very difficult for members themselves.”
Echoing the strain view, research analyst at Namibia Equity Brokers Ngoni Bopoto also spoke to this publication and outlined the risk Namibia faces: “While the political landscape certainly has a near-term bearing on the Rand, we must consider the other factors at play such as USD trading levels, US interest rates, SA sovereign rating concerns and commodity prices. Following Moody’s (earlier) and Fitch’s (recent) decision to refrain from lowering South Africa’s rating to sub-investment grade, Standard and Poor’s will announce its position on Friday the 2nd of December therefore the risk remains very real however consensus is that this has already been priced in. On the resources front, supply and demand fundamentals suggest slight price increases for several commodities, however high inventory levels are expected to curb sharp price increases well into next year. A sustained increase in commodity prices would work improve sentiment regarding most Emerging Market economies strengthening the respective currencies.
“Bringing it home, while a weaker currency would bode well for exporters in general it would also raise import prices fuelling higher inflation. Namibia also faces considerable risk of contagion from an SA sovereign downgrade particularly given our own internal growth and twin deficit issues,” he said.
From a currency perspective it is worth pointing out that ZAR is holding onto much of the advance, regardless of the failed reformist move.
Analyst Petr Krpata at ING in London expects the Rand to hold a portion of its recent gains regardless of the on-going political saga:
“Given the oversold ZAR levels (following the UST sell-off since the US election) and the likely stability in UST yields during the remainder of week, USD/ZAR should not imminently head back above the 14.10 level – the level prior to yesterday’s ZAR rally.”
Confidente. Lifting the Lid. Copyright © 2015