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Update regarding SA's political uncertainty and the effect on the value of the Rand


Dear Investor

An update regarding our increasingly concerning local political scene:

After recalling Finance Minister Pravin Gordhan and his deputy, Mcebisi Jonas from their overseas investment promotion roadshow to the UK & US last Monday, the president looked to have been blocked in his endeavour to replace them by at least 3 of the 6 ANC NEC members when they met a day or two after their return to discuss possible cabinet shuffles.  It was thought that this might lead to a long overdue revolt from within the ANC itself against Zuma, Duarte et al, especially when Gwede Mantashe & Cyril Ramaphosa publicly denounced Zuma’s actions. 

Then two days ago Standard & Poor’s announced that they were downgrading South Africa’s US$ denominated sovereign debt (about 10% of our total govt debt) to below Investment Grade and this further heightened overseas investor uncertainty and the Rand started to move more quickly.  Unfortunately, both of the ANC NEC leaders who had spoken out against Zuma earlier in the week, retracted their statements yesterday as the ANC closed ranks and MP’s were subtly warned by Mantashe not to vote in support of the impending vote of no confidence in parliament called by the DA and the EFF.   

The Rand is now starting a gradual slide as (mainly overseas) buyers don’t quite manage to match (both local & overseas) sellers in their enthusiasm to trade the Rand.  This growing emotional momentum against the Rand (those who are keen to make a good profit from the generous local interest rate have less conviction than those who fear the Rand will lose ground) is gaining in strength and sentiment may worsen against the Rand thereby causing the Rand to topple.

Against this backdrop and looking at the uncertain political future in SA, those long term investors (who do not need to use a certain portion of their capital for at least 5 years) and who can therefore afford to convert their Rands into hard currency, are advised to consider doing so after giving careful thought to the risk of a Rand strengthening again in the next few months or years.      

Stay safe in this beautiful land

Best wishes  

The Intasure Life Team