Rand weakens along with SA’s growth prospects
The local currency is under pressure amid continued load-shedding and gloom regarding SA’s economic prospects
The rand was weaker on Friday morning, as load-shedding and weak domestic growth prospects continued to put pressure on the local currency.
On Thursday, disappointing local manufacturing data for November showed manufacturing output fell more than expected by 3.6% from a contraction of 0.8% in the previous month.
State utility Eskom’s power cuts are putting significant pressure on SA’s mining and manufacturing sectors, which also struggled with unreliable electricity supply in the first quarter of 2019.
On Wednesday, the World Bank cut its economic growth forecast for SA to below 1% for 2020 on concern over the continuing power cuts by Eskom. The World Bank cited unreliable electricity supply and infrastructure constraints as inhibiting domestic growth, and also highlighted persisting policy uncertainty.
Although SA’s weak prospects in terms of economic growth and government tax revenue are weighing on local risk assets, the global environment has been supportive this week, said Mercato Financial Services analyst Nico du Plessis.
Markets have cheered the easing of tension between the US and Iran, with both sides indicating this week that they wish to avoid further military conflict.
At 11.16am, the rand had weakened against major currencies and was down 0.18% to R14.2646/$ and 0.13% to R18.6329/£. It was little changed at R15.8249/€.
Gold was down 0.11% to $1,550.66/oz while platinum was up 0.37% to $971.35/oz. Brent crude was down 0.4% to $65.14 a barrel.