And the first full week of December is done and dusted.
As we step into the latest edition of the Weekly Rand Review, it's evident that the economic landscape continues to offer a mix of challenges and opportunities for the South African Rand.
With so little time left in this year, where is the local 'TZAR' going to end up?
The main highlight of the week of course was the US Nonfarm Payrolls on Friday…
…very often one of the biggest triggers as it is a crucial indicator to the health of the world's biggest economy - and an impact on investor sentiment worldwide. While the global economic landscape remained the primary driver for the Rand's performance, a couple of noteworthy local data results emerged during the week too in the form of GDP and Current Account results.
However, as history has shown, local events tend to have a more muted impact on the Rand compared to global factors.
So, without further ado, let's dive into this week's short but insightful review.
Key Moments (4-8 Dec 2023)
These were some of the major headlines over the last five days:
- Local GDP - Despite reductions in load-shedding during Q3, gross domestic product (GDP) contracted between July and September this year.
- Current Account Improves - SARB's Quarterly Bulletin release showed a sharp reduction in the Current Account deficit
- US Nonfarm Payrolls - In November, the US economy surpassed job growth expectations, as revealed by data from the Bureau of Labor Statistics released on Friday.
After a positive end to the week last time out, the Rand stepped into Monday's trade in the mid-R18.60s…
…but began its first ascent of the week almost immediately and was pushing R18.90/$ by close of play.
Despite the overall strength of the US dollar this year, posing challenges for emerging economies, it is noteworthy that the South African Rand is not keeping pace with its emerging market counterparts. Bloomberg's EM currency ranking for emerging markets places the rand in the lowest quadrant, while half of the twenty-two currencies have strengthened over the year.
Persistent load shedding continues to impede economic growth and dampen investor sentiment…
…and Transnet's substantial and escalating logistical issues in 2023 have had a detrimental impact on state revenues and foreign investor confidence in the markets. In addition, the challenges related to electricity supply, rail, and port constraints have had a cascading impact on the country's overall GDP…
…as evidenced in the Q3 results released on Tuesday.
South Africa's gross domestic product (GDP) contracted by 0.2% in Q3 2023 after experiencing growth of 0.4% in Q1 and 0.5% in Q2.
The contributions to the performance of the economy were evenly spread between the industries on the production side of the economy. Following the results, the Rand tanked to R19/$, marking the first time it has reached that psychological threshold since October.
Looking ahead at Q4, loadshedding has made a resurgence as Eskom resumed regular maintenance, and emergency reserves dwindled.
Logistical constraints have also intensified...
This means we are expected to continue amplifying operating costs and eroding profits. The outlook for the next three months is pretty bleak.
Speaking of Eishkom - Dan Marokane is expected to be appointed as the new Chief Executive Officer of South Africa's state power utility following an almost year-long search for a candidate. This comes after Andre de Ruyter quit the job following an explosive television interview last December and Mpho Makwana vacating the chairman role a month later.
After the mini-collapse the day before, the local unit was back in the R18.90s in midweek ahead of local SARB's Quarterly Bulletin release on Thursday.
And with it came some good news...
South Africa's current account deficit narrowed significantly in the third quarter of 2023, shrinking to 0.3% of gross domestic product (GDP) from 2.7% in the second quarter. In Rand terms, the current account deficit for the July-September period was R19.3 billion, a notable improvement from a revised R185.2 billion deficit in April-June…
Wow!
And in further good news, the trade surplus expanded to R189.1 billion in the third quarter, up from R22.2 billion in the second quarter - benefitting from a weaker Rand.
The Rand found support following the current account results and also piggybacked off a Dollar that was weakening over the increasing belief that the US Fed may implement rate cuts early in 2024...
...and by close of trade Thursday, the Rand was changing hands at R18.76 for a single greenback.
Before we dissect the US jobs data, let’s recap a story that was making its rounds across the major news outlets last week:
Last week, the sheriff visited the African National Congress (ANC) headquarters, Luthuli House, in an attempt to seize its assets over an unpaid election campaign bill owed to Ezulweni Investments. The company is owed over R100 million by the ANC for banners and posters delivered during the party's national elections campaign in 2019.
Yup, banners and posters for R100 million!
Guess we’re in the wrong industry…
However (surprise, surprise), the ANC disputes the validity of the contract and claims it was fraudulent despite both the South Gauteng High Court in Johannesburg and the Supreme Court of Appeal (SCA) in Bloemfontein having ruled in favour of the company. Nevertheless, the ANC has now filed an application for leave to appeal in the Constitutional Court.
Ezulweni Investments spokesperson, Peter Fernando, emphasised the financial impact of the prolonged legal battle and went on to say that “the more the ANC fights, the more interest the company earns”.
In a somewhat quirky response to the matter, the company representative called it the "greatest investment" Ezulweni Investments has ever made. In the same week, we saw both the National Health Insurance bill & the Hate Speech bill passing the National Assembly and NCOP, and now heading to Ramaphosa for final sign off.
The NHI Bill passed despite widespread condemnation from all sectors. The same goes for the Hate Speech Bill, a clear suppression of free speech - leading on to the ANC being able to do more, with the public being able to say less about it.
Ominously, these are all part of the plan the ANC has been working on for years, as they take SA another few steps towards full blown Communism.
It shows where the ANC's interests really are, as Eskom (and almost all SOEs), the economy and generally business continue to struggle to keep their heads above water...
...which does not make rational sense, unless you understand the end goal of the National Democratic Revolution (NDR) is a full reliance on and control by the State.
All that can be said is that the the speed toward the full implementation of the NDR continues to increase, despite the pushback. If you want to get a portal into the future, read IRR's Anthea Jeffrey's articles - she has for years accurately detailed the ANC/SACP's insidious agenda.
By Friday morning, the Rand descended below R18.80/$ leading up to the all-important US jobs data release.
In November, the US economy exceeded expectations by adding more jobs, as reported by the Bureau of Labor Statistics. Non-farm payrolls increased by 199,000, surpassing the anticipated rise of 180,000 and following a 150,000 increase in October.
Concurrently, the unemployment rate decreased from 3.9% to 3.7% over the same period. The robust jobs data indicated that the U.S. economy remained sufficiently strong to dissuade the Federal Reserve from considering interest rate cuts (in contrast to sentiment earlier in the week)...
…and the US dollar found strength again, sending the Rand back up the hill to within a whisker or R19/$.
A Big red negative for the first full week of December! 🙁
The Week Ahead (11-15 December 2023)
Here's what we'll be eyeing up over the next five days:
- SA: Inflation Rate (YoY (Nov), Mining and Manufacturing Production YoY (Oct), SARB Quarterly Bulletin
- EU/UK: UK Unemployment Rate (Oct), UK GDP YoY (Oct), BoE Interest Rate Decision, ECB Interest Rate Decision
- US: Inflation Rate YoY (Nov), PPI MoM (Nov), Fed Interest Rate Decision, Fed Press Conference
To mid-month, we go!
Inflation results and corresponding interest rate decisions are firmly in the spotlight next week, not just locally, but from around the globe as well. And as we know, that generally means movement in the markets are expected.
But which way will it go?
Well, our trusted proprietary forecasting system seemed to know the answer last week - as the market pushed higher just as predicted! (see below - click to enlarge)
(Click to enlarge)
Flying blind can be costly in this market - you need to fly by instruments, not gut feel. Hit the link below to get access to our latest predictions.
Until we meet again, safe trading!
To give you a little helping hand, feel free to take our Rand forecasting service for a test-drive!
Please take our Rand forecasting service for a test-drive!
This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.
Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.
(You don't want to regret not having done so this time next week...)
If you have any questions or feedback, please leave them below.
To your success~
James Paynter
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