Politics hits rand where it hurts

Fears of a further slowdown in the economy and political risks pushed the rand over the R15/$ level again yesterday, and a key index showed that private companies are battling to survive, write Ntsakisi Maswanganyi and Maarten Mittner.

The Standard Bank whole economy purchasing managers’ index (PMI) fell to 47 from 49.1 in February — the most marked deterioration in operating conditions in more than a year and a half. Readings below 50 signal declines.

This means less investment, further job losses and limited support for economic growth — one of the reasons SA is at risk of a credit rating downgrade.

The average PMI for the first quarter was the worst since the inception of the survey almost five years ago.

The rand tanked more than 2% to R15.13/$ after President Jacob Zuma survived a motion to impeach him in Parliament.

Global risk aversion also dragged down the rand and the JSE which closed in the red.

Rating agencies would take the political situation in SA into account when reviewing its credit rating, Finance Minister Pravin Gordhan said after Parliament voted against impeaching Mr Zuma.

“Politics, economics and the fiscal situation are all things rating agencies watch out for. South Africans should be aware of that,” Gordhan says.

Source: www.bdlive.co.za

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