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Rand recovers after SONA chaos, now focus turns to Budget

Feb 09 2017 19:54

Update 22:57: Rand recovers to trade below R13.40/$.

Update 22:24: Rand firms to R13.40/$ following President Jacob Zuma's SONA after reacting sharply on scuffles inside and outside the National Assembly.

On the whole, SONA 2017 was pretty much in line with expectations, and although the pandemonium that unfolded earlier during the address was not favourable, ratings agencies and investors will not just be looking at one event, but a collective view of developments regarding where the country is headed, said Novare’s economic strategist, Tumisho Grater.

She said the next big event on the calendar is the National Budget Speech, which will also form part of the bigger picture.

Update 21:33: Rand holds steady at R13.42/$ as Zuma lauds his deputy for sealing the minimum wage deal and the CEO Initiative, a grouping of business leaders that was founded early last year, to help stave off a ratings downgrade.

He also committed South Africa to renewable energy.

Zuma also acknowledged that South Africa’s competition authorities have done excellent work to uncover cartels and punish them for breaking the law.

Update 20:56: Rand ticks up to R13.42 as Zuma explains what the government means by radical social-economic transformation. "We mean fundamental change in the structure and institutions of ownership and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female."

He says skewed leadership and ownership patterns must be corrected. "The majority cannot be excluded in this manner. My discussions with the business community showed they accepted this. Today we are starting a new era of radical socio-economic transformation. The state will play a role in the economy to drive that transformation."

Government will use procurement and BBBEE to influence the behaviour of the private sector and drive transformation, according to Zuma.

The state spends R500bn per year buying goods and services, added to this is a R900bn infrastructure budget. Those budgets must be used to achieve economic transformation, Zuma says.

Update: 20:47: Rand strengthening to earlier levels of  around R13.40/$ as President Jacob Zuma reassures that the South African economic outlook for 2017 is improving, with an expected 1.3% growth rate in the coming year.

READ: Economy growing, but not enough to create jobs - Zuma

Update 20:28: President Jacob Zuma says guided by the National Development Plan we want a South Africa free from poverty and unemployment.

The economic environment remains uncertain. We anticipate an economic growth rate of 1.3% in 2017 following an estimated 0.5% in 2016.

However, the economy is still not growing fast enough to create the jobs we need.

Rand holds steady at R13.43/$.

Update 20:22: Rand stabilising as Zuma starts his SONA.

Update 20:10: The rand is weakening sharply, now at to R13.455 as security officials forcefully remove EFF members from the National Assembly. President Jacob Zuma still hasn't delivered his SONA.

Violence has erupted outside the House.

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Cape Town - The rand weakened steadily as the Economic Freedom Fighters persistently raised points of order and kept President Jacob Zuma from delivering his State of Nation Address on Thursday evening.

The Democratic Alliance and the Congress of the People weighed in and 45 minutes after proceedings started, Zuma still haven't delivered his SONA. He did try to read his speech, twice.

Zuma was called among others a Tsotsi (thug or robber in Sesotho slang) and constitutional delinquent by the EFF and a scoundrel by Cope.

The local unit was trading as strong as R13.35 to the greenback on Thursday afternoon ahead of the SONA, but weakened to R13.42 minutes before Zuma was expected to start speaking at 19:00. By 19:45 the rand was 0.2% weaker at R13.44/$.

RMB currency strategist John Cairns earlier said the disruptions make for good TV viewing, but not for market movements.

Meanwhile on the other side of the world, US stocks have pushed to fresh record highs on Thursday after President Donald Trump promised details soon about his tax cut proposals.

The blue-chip Dow and the broader S&P 500 both touched fresh record highs following the comments.

"Stocks got an upward lift from reported comments from US President Trump in the afternoon session that he would have something phenomenal on tax in the next two to three weeks," said market analyst Michael Hewson at CMC Markets.

FULL story: Trump takes US stocks to record highs 

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