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Cape Town – The debate around Jacob Zuma’s fate as South African president in a top African National Congress meeting and his subsequent survival had a boomerang effect on the rand, with the currency returning to where it started.
The local unit ended trade on Friday at R12.86 to the dollar. As soon as trade opened at 21:00 on Sunday, the volatile emerging market currency made instant gains of nearly 2% to trade at R12.66/$ on news that Zuma's party was debating his future.
However, shortly afterwards, news emerged from unnamed sources within the ANC that he had survived by a large margin. By 06:05, the rand had returned to R12.86 to the greenback.
"Zuma was apparently very vocal after the NEC vote and after the large gyration in the Far East, we have to expect the rand to be the major interest among emerging market currencies this week," Umkhulu Consulting's Adam Phillips said on Monday in a note.
"Local bonds did not move on Friday and I expect them to lead the way this am. Given the news I would expect month end importers to be happy to buy. It should be a quiet day generally with the public holidays a major reason for this."
The ANC’s top decision-making body – the national executive council (NEC) – debated Zuma's political future after ANC policy guru Joel Netshitenzhe put forward the motion. It was the second motion in six months for Zuma to vacate his office.
Two NEC members confirmed to News24 that Zuma had survived.
The below graph shows the extreme boomerang effect in the rand moments after trading resumed on Sunday.
GRAPH: Intraday moves in the rand/dollar currency between Friday and Monday (Source: Bloomberg)
Zuma survives
A source who attended the meeting told News24 that as many as 70 NEC members speakers spoke for and against the motion.
A Zuma supporter claimed that the president had the support of most speakers, despite earlier confidence expressed by the faction opposing Zuma's leadership that their NEC support had grown.
Unconfirmed reports were that at least 18 NEC members, including Cabinet ministers, supported Netshitenzhe's motion, but that considerably more ANC leaders spoke against the motion for Zuma to step down.
Zuma supporters said it was easier to “crush” the motion this time than in November when former tourism minister Derek Hanekom unexpectedly tabled a motion for Zuma to go.
The ANC is expected to hold a press briefing at 14:00 on Monday, at which the decisions of the NEC will be publicly shared.
Following the debate, Zuma threatened his detractors in the ANC not to "push him too far", sources told News24. "He was very angry. It was the first time I have seen him so angry," said an NEC source.
