The fall of the rand in the wake of December’s shock finance portfolio shuffle and South Africa’s downgrading by ratings agencies was short-lived, President Jacob Zuma said in response to a parliamentary question.
“The currencies of countries that have international trade linkages are contagiously linked to both domestic and global temporal events,” Zuma said in reply to a written question from Democratic Alliance (DA) finance spokesperson David Maynier.
“This is called incidence of speculative attacks. South Africa is not an exception,” he added.
“The analysis of the currency performance shows that the global and domestic events and shocks in the months from November and December 2015 were increasingly having an impact on the ZAR. These shocks included oils prices, figures from China, US interest rates; while at home the sovereign downgrading of South Africa in December and the changing of the minister of finance.”
“The latter incident caused a spike in the rand and within three days, the rand recovered back to the pre-December 9, 2015, levels.
The president went on to concede that the Public Investment Corporation lost R99 billion in the wake of Nene’s dismissal but said it regained the sum “in the course of currency stabilisation as is normal occurrence in speculative global and domestic attacks”.
Maynier said Zuma’s response suggested he did not understand economics and was refusing responsibility for the seismic impact the decision to sack a trusted finance minister had on the country.
“What this reveals is that President Jacob Zuma is economically illiterate and simply does not understand how financial markets work in South Africa. The fact is the decision to fire former finance minister Nhlanhla Nene had a catastrophic effect on the financial markets and wiped out billions of rands in savings in South Africa,” he said.
Maynier noted the South African Reserve Bank had contradicted Zuma.
It found that “the rand exchange rate, equity markets and bond yields all moved abruptly following the removal of Nhlanhla Nene as finance minister. The losses were partially reversed five days later, but a portion of the adjustment was persistent”.
Maynier added: “The fact is that President Jacob Zuma is in denial.”
– African News Agency (ANA)