UPDATE: Rand hits R13.85/$ as Zuma survives call to quit

UPDATE 12:04 - The rand is currently trading at R13.85/$, from an intraday low of R13.42 and R13.49 just before the news that President Jacob Zuma has survived an internal ANC call for him to stand down.

Cape Town - The rand suffered another blow on Wednesday, losing almost 40c to the US dollar on news that President Jacob Zuma has survived calls to resign by members of the ANC following his decision to axe finance minister Pravin Gordhan and stack the Cabinet with loyalists.

ANC secretary general Gwede Mantashe made the announcement at a press briefing on Wednesday on the outcomes of the National Workers' Committee meeting. 

He said the ANC will not be part of the movement to remove Zuma.

Bloomberg, citing two people with knowledge of the matter, reported earlier that Zuma fought back against accusations that he hadn’t consulted adequately with the ANC before a Cabinet reshuffle that included the removal of Gordhan and his deputy Mcebisi Jonas.

The decision of the ANC leaders heightens chances that Zuma will survive an opposition-sponsored vote of no confidence in Parliament if the leadership of the National Assembly allows it to go ahead.

By 11:21 the local unit was trading at R13.77/$.

READ: Zuma said to survive ANC calls to quit

Zuma's Cabinet reshuffle in the early hours of Friday morning, in which he made 20 changes to his administration, has been condemned by civil society, labour organisations, opposition parties and business. It also drew the wrath of S&P Global ratings, which downgraded South Africa's sovereign currency rating to sub-investment grade, or junk status.  

Former home affairs minister Malusi Gigaba, who admitted at a press briefing on Tuesday that he repeatedly met the Guptas and even celebrated Diwali with the family at the centre of state capture allegations, took over from Gordhan. Sfiso Buthelezi, an ANC MP, is his deputy.

“Zuma would not carry out a controversial Cabinet reshuffle such as this one without lining up his support within the party to push back against the backlash,” Ralph Mathekga, a political analyst at the Mapungubwe Institute for Strategic Reflection, a Johannesburg-based research group, told Bloomberg on Wednesday.

“Even if you have those members speaking openly against him, the balance is such that he’s still quite firm within the party.”

READ: Gigaba admits: I celebrated Diwali with the Guptas

Meanwhile, the implications of Gordhan's removal continue to ripple. Reports of National Treasury director general Lungisa  Fuzile's resignation has reignited speculation about a hollowing out of the organisation.

Moody’s also placed South Africa on downgrade review on Monday evening, but will only rule on the negative rating watch within 30-90 days. This gave the rand some reprieve.

Mantashe said the ANC has noted the concerns raised by S&P about the removal of Pravin Gordhan.

He said the ANC has full confidence in the new finance minister, Malusi Gigaba.

On the S&P credit downgrade, Mantashe said "we remain committed to sound and prudent financial management".

"Our financial institutions are intact and there will be no tampering with them."

RMB currency strategist John Cairns said South Africa should expect a downgrade sooner rather than later, and warned that a Fitch downgrade could come at any time.

Citing the extent of foreign buying of local bonds, Cairns said this flood of money continues to restrain far greater losses in the rand and bonds. "Foreigners remain net buyers of local bonds, picking up another R1.5bn yesterday," he said.

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