Cape Town - Although the student protests outside parliament probably contributed to the rand weakening on Wednesday, there were actually three other main reasons for the currency's downward movement, economist Dawie Roodt told Fin24.
These three main reasons, in his view, all related to Minister of Finance Nhlanhla Nene's mini budget. Nene said weaker economic growth was expected in the South African economy, that income had been weak and that state institutions were in trouble.
The rand slumped almost 2% from R13.27 against the dollar before the mini budget to R13.52 shortly thereafter.
Economist Mike Schüssler, chief economist at Economists dotcoza, also told Fin24 that he was not sure whether the rand weakened because of the chaos outside parliament or because the mini budget showed that there is R7.6bn less income expected, not much cutting of expenditure and still nothing for the students.
In his view, however, there were lots that reminded him of the 2001 decline in the rand.
"We are again hearing for about the fourth or fifth year in a row that the deficit will decline to 3% of gross domestic product (GDP) in three years' time. That should have happened years ago - for instance in 2013 and not by 2018," he said.
"The budget deficit remains the highest concern as the tax base is under pressure and government spending will keep increasing as salaries just go up and up in government."
The average government salary in 2014 was R241 000, while in the private sector it was R196 000. He pointed out that this more than 20% premium is way higher than almost all other countries.
"At 14% of GDP government salaries are the highest in GDP terms in all but three other countries. There is spending on the wrong thing here - fiscal slippage they call it," explained Schüssler.
He said in the past the government indicated that net loans would not go over 40%, then it became not over 45%, and then not over 45.4%.
"So, again things are not going our way. Small breaches become much bigger," said Schüssler.
He reckoned many investors took note of this and were reminded that similar promises had been made a few years ago. That made them wonder whether they should not just "get out now or risk another year", according to Schüssler.
He pointed out that growth had been downgraded by government, inflation was higher, employment was lower and civil servants were to cost South Africa R5bn more.
"No, I think protests we get 'every day of the week all year' and events like the long mining strike, in my view, weakened the rand over time. But now investors are saying they do not believe the same story again," said Schüssler.
"I know we need real leadership and I know that currently the leaders leave everything for the finance minister and Reserve Bank governors or vice chancellors or ordinary citizens."
Schüssler reckoned investors were looking at events in South Africa and saying to themselves that it seemed like the students and the ordinary citizens were the real leaders and not anyone in government.
"That makes investors worried as the absence of our leadership and the inability to take decisions and implement them economically is not there," cautioned Schüssler.
"Investors have seen returns in the private sector fall to below 6%, risks increase and our political leadership still responds with a deafening silence."
Commenting on the rand's slide, independent treasury specialist to corporates, Adam Phillips of Umkhulu Consulting, said firstly, the bounce down to 13.00 was too quick and there was not enough good news to support the rand.
"We have filled back in some gaps very quickly on the back of concerns that a US hike might still happen in December. Chinese growth is still a concern and I don't think from a sentiment perspective that the student fee protesting and EFF causing problems helps either.
"Rating agencies will now comment on Nene's speech. The one to watch is Fitch."
Phillips said the rand-dollar exchange rate might be near the short-term top, but it remains volatile.
Brett Birkenstock, director of Overberg Asset Management, said the sharp rand depreciation on Tuesday and Wednesday is also symptomatic of a broad sell-off across all emerging market currencies and is not an isolated South African event.
He said, therefore, the depreciation cannot be blamed soley on the mini budget or the student protests.
"The riots do, however, impact sentiment and would lead to the rand potentially falling more than other emerging market currencies," he said.
By 18:20 on Wednesday the rand was trading down 1.45% at R13.47 to the dollar.