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The rand slumped about 3% against major global currencies on Thursday afternoon, as investors digested the possible resignation of President Cyril Ramaphosa, and the implications for SA's budget deficit.
The rand declined more than 3% to R17.58/$, and had slumped 4.22% to R21.625/£. The yield on SA's 10-year bond increased 51 basis points to 11.31%, on track for its worst day since 2020, Bloomberg reported. Banks were under pressure, with FirstRand down 7.26%, Standard Bank 6.8%, and Absa 7.8%.
Ramaphosa is also expected to resign as ANC leader and will withdraw from contesting the elective conference at Nasrec, News24 reported on Thursday. This comes after a Section 89 panel found Ramaphosa may have contravened the Constitution and anti-corruption laws with his dealings at Phala Phala game farm.
Capital Economics senior emerging market economist Jason Tuvey said markets were concerned about the implications for SA's anti-graft efforts, fiscal consolidation, as well as political risks generally.
"The report is pretty damning, to be honest," he said. "The big concern here is what this means for the ANC and the role it plays in politics. They have been in power since the end of apartheid."
Co-chief investment officer at Anchor Capital, Nolan Wapenaar, said the rand's movement was at odds with the rest of the global market.
Riskier assets have been given a lift recently after US Federal Reserve chair Jerome Powell signalled a smaller rate hike at the bank's December meeting.
"The Phala Phala events have shocked the domestic market with South Africa-centric equities, domestic bonds and the rand losing value while the market assesses the impact on domestic politics and the ability of the government to continue with its drive toward rebuilding South Africa," said Wapenaar. "This will likely weigh on domestic assets for a while."