Zuma on Nenegate: “Markets over-reacted to the firing.” Rand tanks again.

Sometimes you just have to take it from whence it comes. SA President Jacob Zuma grabbed television airtime last night to tell the nation that investors “over-reacted” to Nenegate. From his perspective, it’s easy to see how he could thus rationalise the disaster. A couple hours after Zuma’s fateful decision smashed SA stocks and bonds – wiping R500bn off their value in two sessions – the instigator addressed a small group of businessmen in Johannesburg. Contained within his ad-libbed half hour of rambling was this insight into how prices are determined: “I define it differently, the value of a commodity. It is the necessary labour time taken in the production of the commodity. That is what determines the value.” Funny thing that. The worthies who drove the Soviet Union to economic collapse and subsequent disintegration held the same view. Global investors reacted to this latest diatribe last night by selling the Rand again, the currency at one point hitting a low of R17.99 against the US Dollar. If you think education is expensive, try ignorance. – Alec Hogg

South Africa's President Jacob Zuma (L), who is also the president of the ruling party, the African National Congress (ANC), gestures next to his Deputy President Cyril Ramaphosa during the party's 104th anniversary celebrations in Rustenburg January 9, 2016. REUTERS/Siphiwe Sibeko
South Africa’s President Jacob Zuma (L), who is also the president of the ruling party, the African National Congress (ANC), gestures next to his Deputy President Cyril Ramaphosa during the party’s 104th anniversary celebrations in Rustenburg January 9, 2016. REUTERS/Siphiwe Sibeko

JOHANNESBURG, Jan 10 (Reuters) – South Africa’s President Jacob Zuma said markets overreacted to his decision to sack Nhlanhla Nene as finance minister in December.

The president last month changed finance ministers twice in a week, sending the rand plummeting, alarming investors and triggering financial turmoil.

“It was an overreaction, really, from my point of view,” Zuma told SABC television in an interview aired on Sunday.

The rand rapidly weakened by more than 5 percent after Zuma appointed the relatively unknown and untested David van Rooyen to succeed Nene.

“People didn’t understand what was happening, and they exaggerated the issue,” he said in another interview aired by ENCA on Sunday.

“The rand, for an example, had been going down when Nene was there. It had been going down for months and months. It was not triggered by the decision,” Zuma told SABC.

But Zuma in December bowed to pressure within days and appointed Pravin Gordhan, who held the job from 2009 until 2014, to replace Van Rooyen as finance minister.

The rand has since continued its slide, reaching a new record low on Friday as investors sell out of emerging market assets on worries about a slowdown in China.

Top SA cartoonist Jerm (aka Jeremy Nell) offers his take on Nenegate. Access more of his work by clicking here.
Top SA cartoonist Jerm (aka Jeremy Nell) offers his take on Nenegate. Access more of his work by clicking here.

RAND STEADIES BELOW R17 AFTER HITTING NEW LOW OF R17.99/$

JOHANNESBURG, Jan 11 (Reuters) – South Africa’s rand pared losses on Monday after dropping sharply in erratic Asian trade with dealers talking of Japanese sellers in a very illiquid market.

By 0813 GMT the rand was 2.85 percent weaker at 16.78 against the U.S. dollar, stabilising after falling as much as 10.3 percent at one stage in Asian trade to reach 17.9950 per dollar, by far its weakest level ever.

“It appears as if yield-hungry Japanese retail investors decided to cut their ZAR positions this morning, which triggered a number of stop losses and sent the currency into freefall,” Barclays Africa currency strategist Mike Keenan said in a note.

South Africa’s currency has hit several record lows already this year on concerns about slowing growth in Africa’s most developed economy and in-line with weakness in other emerging markets.

President Jacob Zuma said on Sunday that markets overreacted to his decision to change finance ministers twice in a week last month, comments likely to worry investors.

“Local sentiment remains poor and the fact that this weekend’s ANC conference did not address investor concerns, suggests that these fears could persist,” Keenan said.

“The underlying ZAR mood remains extremely bearish.”

The JSE securities exchange’s Top-40 futures index was down 1.04 percent, suggesting the local bourse would open more than 450 points lower.

In fixed income, government bonds mirrored the rand, with the yield for the benchmark 2026 government bond adding 34 basis points to 9.865 percent.

Some of the comments under the link to this piece on Alec Hogg's Facebook page.
Some of the comments under the link to this piece on Alec Hogg’s Facebook page.
You'll love our FREE daily newsletter
  • JustMe

    If you really want to mess with the economy and the markets, all you need to do is place a microphone in front of President Zuma, ask one question about the Rand and the economy and look far into the distance to what the destruction.

  • Schalk W. Cronje

    The blunder Jacob Zuma makes is that he thinks all South African citizens are stupid. Ag! please Jacob wake up and smell the roses!

  • Bruce Mills

    Youmake a good point – who is the cabal of advisors that Jacob Zuma relies on and what their qualifications ? Maybe having attended Patrice Lumumba University in Moscow on revolutionary economics or liberation theology for budding dictators is sufficient.
    It is quite simple to correlate an Act or Parliament that is anti-business and a wobble in the Rand with capital [ that stuff that no business or country can do without] flowing off shore to better business climates. Mark each time the President has a giggle session in Parliament or more of his loyal Cadres are uncovered stealing from the Fiscus and the Rand falls with capital flight and it is easy to show Jacob Zuma, our President, that the continued decline has a direct correlation [ oops – big word] or keeps step downward with each fumble his Government makes.
    The kicker was Nenegate – The late David Bowie wrote lyrics ” Putting out the Fire with Gasoline” kind of sums up the reaction and post Nenegate spin or shock coming from the President.
    The ANC are clearly floundering and the cost to future generations will be massive.

  • Paul S

    Well, there goes our grand plan to head back to SA to hell in a handbasket. No way any sane individual or investor would associate themselves with the local economy now.

  • 小杜 (xiao du)

    Short – medium term the rand is going to tank.

    There are no good fundamentals for the next while.
    Debt is outstripping the tax income, and the government is playing silly buggers spending money we don’t have. Every time Zuma opens his mouth these days we lose value.

    I’ve always been a believer in property, but its a slow turnaround especially when the currency is devaluing so fast. Right now its a case of divest a little and sit and wait for the rest to (miraculously or hopefully) revalue. Stable currencies / locations are always a good place to sit your money whether in money or equity of some type, but then returns are low. You take the risk, you get the reward.

    Right now lots of risk, no reward for Rands, unless you’re exporting

  • Tata ma chance

    Air tickets to Oxtralia one way?

  • Tata ma chance

    You should rather take a chill pill friend, because the SABC tells the African people how well Joker is doing and, because their only source of information is the State media, they believe them. I mean anything you see in print, or tv must be the trufs.

  • Tata ma chance

    The anc are economic traitors, but when Mielie meal is so expensive people are starving, they can always blame Apartheid, and minorities. There has to be a real reason the whole of Africa is by and largely a dung-heap.

  • Macafrican

    Currencies go all directions. We moved to US at 7.5 and moved back at 11.5 in 2002 then imported a boat at 5.7 in 2006 and here we are at 17. If I was on opposite side of those currency swings I’d be a lot poorer.

    Currencies aren’t investments unless you want to die slow death in money market. which asset (equity, property, bonds, art, etc)?

  • 小杜 (xiao du)

    Forex. 30% year on increase.

    Divest the fark out of SA while the rand is still worth anything.

    Apartment pricing in Clifton has risen dramatically since 2010 though.
    15-30mill is pretty much what I’m seeing on Private Property. Presumably as the people buying are buying with $, GBP, or other real currencies.

  • Macafrican

    uhm, no

    the apartment is R15m NOW, which is less than $1m but Xmas 2014 was $1.25m

    anyway, my question is what assets to buy with my ‘free’ $500,000?

  • 小杜 (xiao du)

    Just to be a contrarian – that R15m apartment in Clifton is worth R25-R30m now.
    The rand depreciation has made that gain moot though.

  • New SA is dysfunctional !

    And this idiot is considered as completely rational by the ANC ? if this reaction isn’t sufficient evidence that global investors have all but lost confidence in South Africa with zuma in charge, then this is it !

  • Lawrence Dahl

    Zuma needs to take his pants off to count to 21. Actually, that would explain a lot…

  • Lawrence Dahl

    ANC voters – WAKE UP! Zuma is destroying this country. Time is running out.

  • Lawrence Dahl

    Zuma can’t take responsibility for anything. It’s high past time for blaming Zuma. Blame must go to all his advisors and ANC inner circle, for allowing him to say the harmful, delusional, denialistic things he is saying, and further tanking the rand in the process. I watched Cyril Ramaphosa today in one of those ridiculous New Age breakfast discussions broadcast on SABC. That man is utterly compromised and complicit by his silence. I have no respect for him anymore.

  • jjstccean

    Seems like JZ just has to open his mouth and mouth, some kind of gibberish which even he himself do not understand and the Rand gets choked. How does the ANC cadre deal with this mentality. Or are they all on the same below par level in the slippery think tank.

  • Dr Who

    As the father and proponent of good news in our media can JZ not just stop blessing us with his version, the goodness is unbearable and bringing our land to its knees.

  • Surveyor General

    Well the picture of the two is proof enough that between them, they can only count to 12. The country should have expected it as soon as “ignoranuses” are elected to run the country!!!

  • Kiepie

    Looking fwd to winter and the chances that this man may get laryngitis for even just a week.

  • Macafrican

    At what point would the crazy currency movements represent an opportunity?

    The world is very irrational right now

    You can borrow at 1.5% using hard currency listed shares as 2x security and the shares yield more than 2% in dividends (Apple, GE, many others)
    So $1m shares you have $500k ammo that actually has a negative cost of capital. Now you go looking for $ terms cheap assets in clobbered currencies

    The people that were harping on about how their R15m Clifton $2m apartment from 2010 was better investment than shares are maybe not so loud anymore with apartment at less than $1m now.

    So which assets?

  • Ali Cutty

    Good ol’ Zuma, doing what Zuma does.