Strangled economic activity puts rand on the backfoot

2015-02-26 00:00

JOHANNESBURG — SA’s rand weakened against the dollar and government bonds pared gains yesterday after Finance Minister Nhlanhla Nene raised income taxes, cut economic growth forecasts and widened budget deficit estimates.

Nene said in his Budget speech that SA will raise income taxes for the first time in 20 years as weak economic growth kept ­revenues low and trimmed growth forecasts as chronic electricity shortages strangled economic activity.

Nene also said the government in Africa’s most advanced economy would have to borrow from both domestic and global ­markets to plug the funding gap, warning however that unsustainable debt levels would threaten its credit rating.

At 17.00 GMT the rand was trading 0,37% weaker at R11,5145/$.

“It’s trading in conjunction with its emerging market peers on the session and global drivers remain key for now,” ET market analyst Jana van Dev enter said.

“The bonds have sold off quite sharply off their intraday highs, but they are still stronger.”

The yield on the 2026 benchmark was down five basis points to 7,605% after ­falling as much as 14 basis points earlier following Federal Reserve chairperson Janet Yellen’s comments on interest rates.

Traders are also looking forward to the release of local trade data tomorrow for direction.

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