COMMENTARY-South African Politics; a major risk for the rand — TradingView News

by MMC
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The rand and South African politics make uncomfortable partners as electoral uncertainty weighs heavily on the country’s currency and fiscal situation.

While this is not yet a doomsday scenario, investors are clearly focused on South Africa’s debt situation and the potential negative fallout from election promises.

A possible coalition government of the African National Congress with the Economic Freedom Fighters party could bring the specter of default back to the forefront thanks to promises of increased state spending. In such a scenario, uncertainty surrounding private sector companies would deteriorate investor confidence and weigh heavily on the rand.

Ratings agencies are starting to take a closer look at South Africa’s fiscal situation following last week’s 2024 budget and early reviews are not encouraging.

Fitch expressed concern about the country’s ability to achieve fiscal consolidation and the political will to take binding measures to control spending and borrowing.

The rand is expected to struggle ahead of the May 29 general election and USD/ZAR could surpass the significant high of 19.6400 from last October or even attempt to reach the record high of 19.9075 from June 2023.

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