Welcome back to our next Weekly Rand Review.

It's our pleasure to share the ups and down in a week in which the South African Rand did exceptionally well against the US dollar...

...and we'll offer some insights into what the coming week may hold.

Spectacular weekend aurora sightings fittingly accompanied the Rand’s own 'purple patch' performance to register its best levels of the year. While the solar storms may have caused an internet outage in South Africa and on the continent's east coast...

...it did nothing to blunt the Rand’s performance.

And as we head ever closer to election time, and unemployment continues to climb, the ANC are bulldozing through the next two pieces of socialistic/communist pieces of legislation...

...although there are sure to be some legal hurdles ahead.

Let's dive into the details:

Key Moments (13-17 May 2024):

These were some of the major headlines over the last five days:

• Pre-Election Legislation: The NHI Bill was signed into law, as the BELA Bill and Electricity Regulation Bill were pushed through Parliament.
• SEIFSA Signs a 3-year Wage Agreement with the unions: avoiding a strike in the metal industries sector.
• Q1 Unemployment Figures: Unemployment shifts upward by another 0.8% to hit 32.9%.
• SA Retail Stats for March: Up 1.4% from February 2.3% up YOY

After a late surge at the backend of the previous week, the Rand got going on Monday at around R18.37 and after a brief flurry towards R18.45/$, the local unit continued where it had left off as it pushed further south to touch R18.30 to the USD before losing a few cents in late trade.

The metal industry seemed to breathe a sigh of relief as SEIFSA (representing employers of over 170,000 workers) reached agreement with the unions signing a historic three-year wage agreement...

...while this avoided a strike, it meant a higher-than-inflation increase of 7% for the year, something smaller companies especially will not exactly be ecstatic about, especially in the current environment.

...as they rightfully should be.

Tuesday saw the local unit lose ground as the market pushed higher to test above R18.45 before the Rand managed to bounce back and drive stronger to end the day about 10c stronger.

Wednesday started with the Rand stuck in a R18.33-18.42 range but it didn't stay that way...

Of course, the big news for the day was President Ramaphosa signing the controversial National Health Insurance (NHI) Bill into law amid much pomp and ceremony..

While not many details are included in the Bill, this controversial piece of legislation is of course being punted to reduce poverty and to playing field...

...but to what level??

Well, clearly not all a high one (who would have guessed?), based on Ramaphosa statements on Wednesday, in which he said that South Africans must accept that we will all be equal, so we must prepare to join the less fortunate in long queues and crowded under-resourced hospitals...

...saying further that the complaints came from a few who don’t want to relinquish their benefits!

This will very likely result in a loss of quality healthcare due to skills emigration and government interference (Discovery's shares dropped 7.4% on the news)...

And where are the funds going to come from, with a shrinking and already bleeding tax-base?

...and what about the very real spectre of an even bigger pot from which the corrupt can steal with a scheme that is estimated to cost well over R200 billion a year to run?

...who can forget the Covid debacle, during which corrupt officials paid out hundreds of thousands in tax payers’ money for every day items, like hand sanitizer and face masks?

Bottomline: This is openly socialistic/communistic in its objective and intent - to make the people reliant on - and controlled by - the State!

Watch this space....

And in another bit of sobering news, first quarter official unemployment rate increased by 0.8% to 32.9% from 32.1% in 4Q 2023, with the expanded unemployment rate now being at 41.9%!

Unemployment has now risen by 22% since the last elections in 2019...

...so much for the ANC’s promise of making job creation their number one priority!

But it was not all bad news...

...as Retail stats for March pleased on the upside, coming in 2.3% higher than at the same time in 2023. On a monthly basis the increase was up by 1.4% over February’s 1% increase.

Whatever the news, however, the Rand powered on unperturbed, punching lower to take out Monday's low to end the day in after-hours trade around R18.25/$...

...helped along by news out of the US which showed zero growth in Retail Sales MoM, while the YoY inflation rate dipped slightly from 3.5% to 3.4%, an encouraging sign in terms of potential rate cuts.

In other news:

• Over in the UK, unemployment figures released showed an increase from 3.8% to 4.3% during the first quarter - a loss of 178,000 jobs. Interestingly, real wages rose by the highest levels in two years, despite inflation dropping steadily since the beginning of the year, reaching 3.2% in March.
• As the Russia/Ukraine conflict extends into its third year, Russia appears to be gaining some advantage in a new initiative in the northeastern Kharkiv region, where they allegedly are looking to create a buffer zone following Ukraine's recent shelling of their Belgorod region.

Getting back to the Rand, Thursday dawned with the local unit around R18.25 and after a brief test higher, the Rand continued its march south, managing to test R18.15/$ in after-hours trade.

Thursday saw two further pieces of legislation being pushed through with just weeks to go before elections:

• The Basic Education Laws Amendment (BELA) Bill was passed in Parliament and awaits Ramaphosa's signing into law. Another draconian piece of legislation which will enforce government's control over what students are taught - under this law, homeschooling parents can be jailed for 6 years for not teaching their children the curriculum dictated by government. Next important communistic block in place...
• The Electricity Regulation Bill also passed quietly through NCOP. This game-changing legislation will allegedly set the country on a path to reforms that will end the century-old Eskom monopoly…and hopefully a more reliable supply...

But from what it seems, government will still be in control of all the main levers...which doesn't bring a lot of confidence, considering how well they have managed to run Eskom...into the ground.
And then it was Friday, and with it came some good news:

For the first time in 15 years, South Africa’s income exceeded its non-interest expenditure. The outcomes also showed a budget deficit of 4.6% of GDP, slightly better than the deficit forecast a month earlier. Something encouraging!

Also, there was one small ray of sunshine in the tragic collapse of the building under construction in George...

...as a Mozambiquan citizen was pulled from the rubble after 118 hours of being buried alive, and on Friday, having ended the cleanup operations, the number of possible casualties was reduced by 19 as the original contractors on-site was reduced from 81 to 62.

As for the Rand, it had a whiplash day as it bounced off the R18.14 level to hit R18.29 to the Dollar, but then reversed sharply as the market pushed all the way down - plus some - to test R18.10 before ending the week a few cents off this level.

All-in-all, a spectacular performance - the best for 2024!

The Week Ahead (20-24 May 2024)

So, after another week of Rand gains against the Dollar, what does this week hold in store?

Well, it doesn't seem that international tensions are easing, as the Iranian president has allegedly been killed in a helicopter crash. In a situation which is already a powder-keg, this has the potential to really ignite something bigger...

There are also few potential triggers in terms of economic releases, some notable ones being:

• US - Durable Goods, Jobless Claims
• UK - Inflation Rate

So bottomline - do not expect a quiet week...

Of interest, our analysis is showing that we could be in for some surprises the next short while.

Until next week, safe trading - and keep your emotions in check!

To give you a little helping hand, feel free to take our Rand forecasting service for a test-drive!

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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.

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To your success~

James Paynter

P.S. Worrying about how to in manage your Rand exposures this year? Email me or give me a call on (041) 373-6310 or (087) 551 2848 - we would love to help.

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