Rand reacts badly to ANC manifesto
The statement on ‘prescribed assets’ in the governing party’s election manifesto spooked foreign investors
The rand suffered on Monday morning as Asian markets digested Saturday’s ANC rally in Durban.
Areas of concern for foreign investors from the policies announced by the ruling party ahead of this year’s general election included ordering pension funds to invest in state-owned enterprises (SOEs) and maintaining Eskom’s monopoly.
As international banks analysed the ANC’s manifesto, the rand slid 1% from Friday’s R13.77/$ to R13.91/$ on Monday at about 5.20am South African time.
The rand was trading at R13.90/$, R15.95/€ and R17.86/£ at 6.45am.
The most alarming statement in the ANC’s manifesto was probably the following: “Investigate the introduction of prescribed assets on financial institutions’ funds to mobilise funds within a regulatory framework for socially productive investments (including housing, infrastructure for social and economic development and township and village economy) and job creation while considering the risk profiles of the affected entities.”
Intellidex analyst Peter Attard Montalto said this should be a wake-up call for the local asset management community.
“The hunt for solutions to Eskom will likely lead to a debate around the need to dictate that the asset management community and banks lend to Eskom to keep it afloat,” Attard Montalto said.
“We found the language on Eskom a slight surprise given the crisis at the entity. The tone of the statement implies strongly that the national executive committee still backs Eskom as a dominant monopoly even in spite of that been at the root of its problems,” Attard Montalto said.
“This also flies in the face of the fact that the renewable energy independent power producer procurement programme has been so successful precisely because it has not been run by Eskom and has seen private-sector involvement in renewables.”
China’s exports showing annual decline of 4.4% in December as opposed to the expected 3% growth set a gloomy tone on Monday morning.
Naspers’s main asset, Tencent, was down 2.6% to HK$322.60. In Sydney, BHP was down 0.32% to A$32.68.
The weaker rand, however, may mitigate these drops on the JSE.