The rand took a nose dive in December 2015 when South African President Jacob Zuma fired Finance Minister Nhlanhla Nene, forcing the rand to fall sharply. The currency dropped to 17. 99 against the dollar in January 2016.
Economists who spoke to Xinhua stated that the stability in the South African markets have boosted confidence in investors leading to the rand appreciating in value.
Standard Bank currency trader Warrick Butler said, “Finance Minister Pravin Gordan’s fiscal policy and targeting of corruption seem to have appeased investors. In the next couple of months we are likely to see the rand gaining to 13. 5 against the U.S. dollar. The world economy is also improving and benefiting the emerging markets and that has boots the rand.”
Butler said the increase in the price of oil also helped the rand.
He said market prospects were promising, as some central banks in the world voiced confidence in South Africa’s liquid financial sector.
Nsununguli Walter Mbongolwane, a project management consultant from Expert Factor, agreed, saying, “Pravin Gordhan came in and gave confidence to the markets. His policy framework gave confidence and some investors started sending money into the country unlike in December 2015 when they withdrew their money from the country. The stability in the markets has been the major driver in the rand surging.”
Gordhan has held meetings with credit rating agents. He also undertook a roadshow to London. Boston and New York where he met over 250 investors to allay fears about the South African market.
Mbongolwane said, “There is also an increase in commodity prices. South Africa as a commodity driven country has seen some significant sales of commodities thereby pushing the rand up. There has been a rise in demand for South African products outside the country.”
As local government elections will be held in the country on August 3, 2016, there will be some populist statements which could affect the rand, he said.
The government, he said, could be forced to plough more into the social services to lure voters. He cautioned that some investors might shun the country for putting too much money in the non-productive sector.
Mbongolwane, however, stated that the rand was likely to stabilize and be better than how it was early this year.