How will the rand fare against the election?

The 2016 Municipal Elections are happening today, with the political circus in overdrive as parties chase your all-important vote.

But how have Municipal Elections impacted the rand in the past?

What’s the difference between Municipal and General Elections?
General elections consist of a national and provincial vote. Nationally and provincially you vote for a political party (Proportional Representative or PR electoral system) to get seats in the national and provincial legislatures.
In municipal elections, you vote for a political party and a ward councillor (a mixed system of PR and ward constituency) to get seats at the municipal level. So it’s about selecting leaders for the country and province vs. selecting leaders for your city/town and local ward.

Which are more important, general or municipal?
If you think Municipal elections are note important, think again. Chances are your daily lives are more impacted by who leads your city/town/ward than who is leading the county. Think local road, refuse collection, rates you pay, sewerage and water.

What are the possible implications for the rand?
If previous elections (Municipal and General) are anything to go by, not much! Yes, we’ve seen little to no reaction in the currency market compared to previous elections. Does that mean elections are not important? Not at all, it just means that their immediate impact may be limited.

Why have elections had little impact in the past?
The real impact will depend on the policies set by the respected governing party. Policy takes a considerable amount of time to filter through the various levels of bureaucracy. Previous elections have been a near formality, with little to no real challenge to the ruling party. We’ve also seen relatively free, fair and peaceful elections in the past (and long may this continue).

What scenario could see rand improvement?
Free and fair elections with no violence/intimidation is really important. Considering all goes well come August 3rd, and opposition parties improve their showing, we could see the rand given a nice little boost.

What scenario could see rand weakness?
Any hint of violence/intimidation or elections that are not totally free and fair could impact negatively and cause a rand sell-off. Uncertainty/coalition governments in some of our larger metros could lead to a government in limbo and affect sentiment.

Source: Currencies Direct for www.currenciesdirect.co.za

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