South Africa’s rand strengthened on Wednesday at lunchtime after the ruling African National Congress (ANC) gave President Jacob Zuma a deadline to resign or face a motion of no confidence in Parliament on Thursday.
At lunchtime, when the ANC parliamentary caucus was given the mandate to vote Zuma out if he does not resign, the rand quickly hit R11.80 before stabilising at R11.82. If the rand breaches R11.7975, this will be its strongest in two and half years.
The local currency had fall to 11.99 early on Tuesday as markets awaited the outcome of an ANC meeting on Zuma’s fate, before climbing to around 11.88 later in the day after the party said it was recalling him.
It is widely believed that Zuma’s resignation, which is believed to be only a matter of time now, will instill confidence in the markets and strengthen the local currency. Zuma has, however, stated he will not be resigning.
Zuma, dogged by allegations of corruption since coming to power in 2009, is under pressure to step down ahead of 2019 national elections which will likely see his deputy Cyril Ramaphosa, a former businessman preferred by investors, become the country’s new president.
The rand, which has strengthened significantly since the ANC elected Ramaphosa to succeed Zuma as party leader in December, has traded nervously in recent weeks as Zuma resisted calls to reliquish his post, insisting he has done no wrong.
“The South African Rand performance will probably be influenced by the expected announcement from President Zuma later today, following yesterday’s reports that the ANC formally asked him to stand down,” said Jameel Ahmad, global head of currency strategy and market research at FXTM.
“If President Zuma does agree to step down then it would likely have a positive impact on the rand. The currency benefited significantly in the aftermath of the ANC conference outcome late last year, and would be expected to follow a similar pattern if Zuma agrees to leave his post.”
Related video click below: