As the rand improves, our economy still needs improvement

PravinThe South African rand has been going through some terrible conundrums over the year, ever
since President Jacob Zuma fired our most capable Finance Minister Pravin Gordhan and the
economy was downgraded to junk status by international finance firms S&P and Moody’s.
However last week Friday when the rand suffered a two percent slump, the currency advanced
as much as 3.3 percent on Monday, on track for its best day since the end of 2015, after
Moody’s Investors retained its investment- grade rating on the nation’s local-currency dept. So
what brought about such a change in fortunes?
The rand recovered on Monday from steep falls suffered late on Friday after the downgrade,
taking some relief from Moody’s decision to only place South Africa on review for downgrade. A
cut to “junk status” on the local currency depth by both S&P and Moody’s could have seen
South African depth lose its place in Citi’s World Government Bond Index (WGBI), the biggest of
the global benchmarks and tracked by about $ 2-3 trillion of funds.
So far we seem to be in good hands, with this latest recovery by the currency, we had better
hope for smooth sailing here on end. So while our currency is on review again, this provides us
with an opportunity to our government, particularly the Finance Minister and the Treasury
Department to come up with a recovery plan. How this is done will be determined by the
policies of the current administration. It is important that we get back on to a level footing with
the WGBI and remain on course to stabilize the economy and prevent further loss of revenue
from foreign markets and an increase in unemployment.
S&P lowered South Africa’s local-currency rating one step to BB+, one level below investment
grade, and placed it on a stable outlook. Its assessment on the foreign-currency depth, which it
already considered speculative, was taken one notch to BB. Moody’s opted to keep both
readings on Baa 3, its lowest investment grade, but put them on review for a possible
downgrade.
The currency has been on a roller-coaster ride this year as political infighting curbed efforts to
boast Africa’s most industrialized economy. Since Finance Minister Pravin Gordhan was fried in

March, the nation’s foreign credit grade was cut to junk by two ratings companies and
economic growth stalled.
So now this is our opportunity to come back on track. No more stalling the time is now for
economic change.The markets may still be in a chaotic state but if Finance Minister Malusi
Gigaba were to remain in office than face being axed like his predecessor, and show dynamic
leadership then we may see that we remain at the level of BB or go further to BB+. So it will
depend on the efforts of both government, business and also civil society to come with a
solution that will assure investors that South Africa will improve in terms of both economics
and the market.

Sources
African Rand Surges
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