South Africa's Finance Minister replaced
South Africa's finance minister replaced
The business climate in South Africa showed an improvement in September
compared to August, according to the latest Business Confidence Index released
by the SA Chamber of Commerce and Industry on Wednesday.
In the past week, markets where hit by a barrage of local and international news.
On Tuesday, President Cyril Ramaphosa announced that Tito Mboweni would replace Nhlanhla Nene as finance minister. This makes him South Africa’s fifth finance minister in three years. Mboweni replaces Nene who confessed to lying about his meetings with three businessmen accused of plundering state funds.
The rand supported Mboweni’s appointment and strengthened to around R14.50 against the US dollar, after trading at over R15 to the greenback at some point. The SA currency also traded stronger against the euro, at R16.76, and at R19.11 to the pound.
The business climate in South Africa showed an improvement in September compared to August, according to the latest Business Confidence Index released by the SA Chamber of Commerce and Industry on Wednesday. However, this index is still indicating low levels of confidence by business in the local economy.
The International Monetary Fund (IMF), citing trade protectionism and instability in emerging markets, downgraded its global economic growth outlook for this year and next. The IMF now sees global gross domestic product growth of 3.7% in 2018 and 2019, down from the 3.9% estimate for both years in April.
Global markets sold off the past week triggered by rising US 10-Year Treasury Yield which lifted from just above 3% at the beginning of the month to 3.25%. With equity markets having been previously well supported by robust earnings and relatively low interest rates, the prospects of the removal of one of those pillars of support (low interest rates) spooked the market. This combined with a slowdown in China and higher oil prices put pressure on equity markets.
Moody’s did not release its expected statement on South Africa’s sovereign credit rating on Friday evening and the country’s rating accordingly remains at Baa3 stable. Although the announcement was expected on Friday, there had been some speculation that it might take place after the mini-budget on 24 October.
Economists expect markets to consolidate this week after the turmoil of last week, as new Finance Minister Mboweni prepares to deliver the mid-term budget in two weeks’ time.
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