Land reform fears keep rand on the back foot

The rand fell more than 1.5% on Wednesday on continued concerns over SA’s land reform policy.

In the previous session the rand had a knee-jerk reaction to news that the land expropriation bill was provisionally withdrawn from Parliament, but the market soon realised it was a separate process to changing the Constitution to allow for land expropriation without compensation.

This was despite the weakness of the US dollar in terms of the US-Mexico trade deal which "whetted the appetite of the market for riskier assets", according to TreasuryONE currency dealer Andre Botha.

The local unit was trading 1.52% weaker at R14.44 to the greenback by 16:52 in Johannesburg after flirting with the R14.50-level earlier in the session.

On Tuesday the rand broke below R14.00/$ to trade at R13.96 shortly after the news that the expropriation bill had been withdrawn.

"The reality was that ... the withdrawal of the bill does not mean that the ruling party is closing the book on the bill, rather that it will be redrafted to be more in line with the [ANC's] vision,”said Botha.

RMB's Nema Ramkhelawan-Bhana echoed these sentiments.

"Despite being purely procedural to allow for necessary redrafting following the constitutional review committee process, the retraction of the bill sparked an exaggerated response, reflecting the extent of investor angst over the issue of land expropriation without compensation. In truth, this type of reaction might well become commonplace ahead of the 2019 general elections as there are concerns that decisive action on high-profile amendments will be delayed. It seems that UK Prime Minister Theresa May could not convince the market otherwise with her endorsement of President [Cyril] Ramaphosa’s stance on legal and transparent land reform falling on deaf ears." 

May is in the country on her first official visit to Africa.