After initial gains, rand weakens in wake of Budget 2020

2020-02-26 15:56 - Jan Cronje

The rand initially gained ground against the dollar before weakening on Wednesday afternoon in the wake of the tabling of the 2020 Budget by Finance Minister Tito Mboweni.

The local currency, which opened the day at R15.21 to the greenback, strengthened to R15.13 to the dollar after the Budget was tabled.

By 8 p.m. it had fallen to R15.27. 

TreasuryONE, in a snap note, said its initial strength was due to the Budget largely being in line with market expectations.

The finance minister announced no major tax increases, and, despite some speculation, the VAT rate was not hiked.

Treasury outlined a future proposal to bring down SA's company tax rate of 28% to make SA more competitive, as well as measures to provide income tax relief to individual taxpayers.

"Given the worsening economic realities still facing the Minister of Finance this year, it came as a pleasant surprise that he provided 5.2% adjustments to the individual tax brackets and rebates," said PwC Associate Director Barry Knoetze in a statement. 

Mboweni also announced an ambitious three-year proposal to cut the state's wage bill by some R160bn.

"While government is planning to slash the wage bill by R156bn over next three years - which will go a long way to ensure fiscal sustainability - the actual ability to effect this remains to be seen," said Bianca Botes of  Peregrine Treasury Solutions

TreasuryONE warned that international markets remained jittery due to the impact of coronavirus. While the local currency strengthened in the wake of the Budget, TreasuryONE still expects it to take its cue from internal markets.