Early this month, South African voters lined up in the voting areas to elect their next leaders. When the results were announced, it was as the market was expected. On the presidential level, Cyril Ramaphosa, who ran in the Africa National Congress (ANC) party won. In parliament, the support for the ANC weakened also as had been expected.
Ramaphosa was one of the South African heroes in the fight against apartheid. He was a close comrade of Nelson Mandela, who was celebrated around the world for the work he did. When Mandela’s first term ended, his chosen successor was Ramaphosa. While he did not become president, he used his political connections to create an investment company called Shanduka. The company went on to become one of the largest black-owned organizations in the country. His personal fortune grew to more than $650 million.
Therefore, when Ramaphosa replaced the corrupt Jacob Zuma a year ago, investors expected him to use his record in business and his corruption-free legacy to boost the South African economy. This did not happen, as the divisions in the parliament continued. Therefore, the new mandate was also viewed as a period of redemption.
Still, the South African rand has continued to decline. In fact, it has declined to the lowest level in seven months. The decline is attributed to the continued delay in the appointment of the cabinet. Yesterday, the ANC confirmed that David Mabuza would be sworn in as a member of parliament, paving a way for him to become the deputy president. Investors were not pleased with this because Mabuza was linked to multiple scandals when he served as the premier of Mpumalanga province.
The rand is not the only emerging market under pressure. Other EM currencies have come under intense scrutiny as the trade war escalates and the USD continues to gain. The MSCI EM index has declined by 1.4% this month.
As shown on the one-year chart below, the USD/ZAR pair has been on the rise. It reached a high of 14.70, which is close to the highest level since October last year. The pair has found resistance on this level as shown with the blue line below. This price is above the 25-day and 50-day moving averages while the RSI has been moving on an upward trend. The pair will likely continue moving higher, to test the 15 level.