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The rand led gains among emerging-market currencies on Friday as investors assessed President Cyril Ramaphosa’s pledges to overhaul South Africa’s electricity industry and curb government spending.
While offering little that is new on the planned restructuring of Eskom, Ramaphosa announced sweeping measures Thursday to address power shortages and reduce dependence on the debt-stricken utility.
He warned that the nation’s debt trajectory is unsustainable and said Finance Minister Tito Mboweni will announce spending cuts in the Budget on February 26, with the government and labour unions in talks to reduce the state wage bill.
The rand climbed 0.7% to 14.8506 per dollar by 13:34*, heading for its best weekly performance this year. Yields on 10-year sovereign dollar bonds dropped two basis points to 4.66%, the lowest level on a closing basis since September 6.
“The speech touched on a broad range of domestic concerns, ranging from electricity supply, state-owned enterprises, youth unemployment, climate change and access to education,” said Siobhan Redford, a Johannesburg-based analyst at FirstRand Bank. “It is fair to say the president hit all the right notes in his annual song to the people of the South Africa, but many will want to see action before buying into the promises.”
* Fin24 has updated the Bloomberg article to show the currency's latest gains.
