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After the Bell: The plummeting rand tells us SA’s house is on fire and Ramaphosa is asleep at the wheel

After the Bell: The plummeting rand tells us SA’s house is on fire and Ramaphosa is asleep at the wheel
Illustrative image | Sources: Leila Dougan | Getty Images | iStock | Rawpixel

After the US ambassador to South Africa lashed out at SA for supplying arms to Russia, and SA’s non-response, the rand went from R18.92 to the dollar to R19.32. The significance of R19.32 is that it’s a record low for SA’s long-beleaguered currency.

Here is a rhetorical question for you. What do you do if your house is on fire? Simple, right. You panic. Generally, the first thing to do is take action fast. This is not rocket science. Fires conflagrate. That’s the thing about fires. Quick action is crucial because any delay increases the dangers exponentially.

This is why we have fire alarms. Speed is of the essence. This is why some fire stations have poles down which firefighters ostentatiously slide. Everything in a fire station is designed for speed. Obviously.

So how does this apply to South Africa on 11 May 2023? Well, at around 2.30pm, News24 published a story quoting the US ambassador to South Africa, Reuben Brigety, saying his country was convinced that SA –  even though it claims it takes a non-aligned stance on Russia’s invasion of Ukraine – had supplied arms to Vladimir Putin’s army. Brigety was talking to a group of journalists and he was asked whether he was certain this was the case. “I would bet my life on it,” he said.

Read more on Daily Maverick: US ambassador lashes out at ANC government for ‘providing arms and ammunition to Russia

In diplomatic terms, this is a bonfire in the making. So obviously, the SA government rushes to the pumps, slides down the pole, and comes out with a definitive statement denying SA was doing so, or at the very least, says it is unaware of any such transaction, or it is aware of the transaction, but it will not be bullied by minor global political players like the government of the US.

But no. Instead, hours go past. Eventually, at 3.12pm, presidential spokesperson Vincent Magwenya says on Twitter, “The Presidency has noted the reported remarks attributed to the US Ambassador, and we will respond in due course.”

Well, that’s something. But a definitive statement it is not. Ramaphosa himself is, oddly, taking questions in Parliament, and he is asked about the situation and says more or less the same thing: “In time”, the matter will be discussed. Okay. No rush then.

What happened between the time of the initial comment and the non-response response is that the rand went from R18.92 to the dollar to R19.32 between midday and 1.15pm. The significance of R19.32 is that it’s a record low for SA’s long-beleaguered currency.

Presumably, the comments of Brigety were travelling down the informal networks while the journalists at the briefing were writing up the story. The rand has bounced back a bit, as it often does after calamitous one-day falls like this, and is trading around R19.15 as I write.

In some ways, this is a good example of how currency markets work. They are extremely fast, they respond to the news very quickly, and they tend to overshoot a bit. They also tend to find a direction, and then suddenly snap if there is some proximate cause.

And that general direction for SA has been down for some time now. The reasons are pretty well known, but you can tell when pressures ramp up. Load shedding is now extreme, and seems certain to wipe out any growth this year; greylisting was clearly an embarrassing own goal; and SA participating in war games with Russia has to be part of the mix.

Of course, there are international forces at work, too. Emerging market currencies in general have been under pressure. The currencies of Uganda, China, Nigeria, Turkey, Kenya, SA and Argentina are all down this year. But on the other hand, the currencies of Mexico, Botswana, Morocco, Australia and indeed the euro are actually up against the dollar year-to-date. The US trade-weighted exchange rate against a basket of currencies is a bit down this year and way off its peak in late 2022.

after the bell

Wealth manager Anchor has an interesting purchasing power parity measure for the rand/dollar exchange rate which takes into account comparative inflation rates, and unsurprisingly, the rand is way, way out of range. In historical terms, the rand ought to be trading at around R14 to the dollar. Historically, the rand has been very reactive to political events, and that kind of stuff feeds on itself.

after the bell

Just in case you think that, well, this is not a “house is burning” kind of situation – the rand does bounce around crazily – consider this: the issue Brigety was talking about concerns the docking of a ship called Lady R at Simon’s Town naval base in December last year. It’s a Russian ship and it was and is sanctioned by the US because historically it’s been a weapons-delivery ship. 

Obviously the US, and the West in general, are worried about this and make a fuss. Eventually, a journalist does get hold of SA’s Russia-loving Defence Minister Thandi Modise to ask her for her reaction. 

“I do not want to comment on the contents of this vessel because, until I get all the paperwork, I will be guessing,” she said. That was almost a month later. She still hasn’t responded five months after that. 

Finally at around 7pm, the Presidency did respond, saying it is public knowledge that a Russian vessel known as Lady R docked in South Africa.

“Allegations have since been made about the purpose of the voyage. While no evidence has been provided to date to support these allegations, the government has undertaken to institute an independent enquiry to be led by a retired judge.”

Well, that is something. But the house is still on fire. And the wind is whipping up. It’s getting worse. By the day. DM/BM

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Comments - Please in order to comment.

  • Gerhard Vermaak says:

    An enquiry? Did they or didn’t they load arms? Yes or no? No expensive enquiry necessary!

    • Wilhelm Boshoff says:

      Yes

    • Warren Wilbraham says:

      Could not agree more Gerhard. More obfuscation by the cabal in charge. Personally, I hope there is some form of economic sanction which will accelerate the end of the ruling party, but for that to be replaced with an ANC and EFF coalition. We are stuffed.

    • Jonathan Partridge says:

      You don’t need an inquiry Mr President. You must know whether this is true or not. Just answer the question.

  • Wilhelm Boshoff says:

    Finally the US is starting to turn the screws and we will feel it, with AGOA the first to go. We knew it when the LadyR docked. So the inevitable slide to failed state will pick up pace and all we can do is hold on for dear life. And no this will not be the end of the ANC in 2024. They will hang on by all means possible. (Plenty of examples to the north of our borders and elsewhere in BRICS) For us the shipped has sailed.

    • Ian Steven says:

      And the Waterkloof mail delivery bag afterwards probably contained the instruction on how to reply to any query regarding the Simonstown docking and some loose cash to top up the couch padding

  • virginia crawford says:

    Lies, lies and yet more lies. They are not even mildly embarrassed about lying.

  • Jane Crankshaw says:

    CR is not asleep at the wheel….he’s resting with a smile on a very comfy sofa somewhere ( possibly even in Dubai?)

    • Eulalie Spamer says:

      Indeed. ANC is effectively bankrupt, morally and financially. They still have one lifeline of funding and these benefactors demand a quid pro quo and they take no s**t. And a few politicians will get “to eat a little bit” when favours are exchanged. In Gordhan’s words it is “for the greater good”.

  • Thinker and Doer says:

    It was inevitable that this sort of reaction to the government’s obvious support of Russia would come, somehow they seemed to think that they would get away with their professed approach of “neutrality”, but now the implications of their misguided foreign policy are coming to bite, which will harm us all, but not the cadres and the party who are benefitting from their ties with Russia

  • Laurence Erasmus says:

    Cyril, a President with a jellyfish spine is clearly asleep at the wheel if he is unable to equivocally state yes or no to the question of whether his government loaded weapons of war into the Lady R. It is impossible for a Russian sanctioned ship known to be a weapons transporter to dock in our naval base under dark without the knowledge and approval of the South African government!

  • Dennis Bailey says:

    “The government has undertaken to institute an independent enquiry to be led by a retired judge,” another opportunity to loot with impunity. VCiva, ANC, Viva.

  • Garth Cameron says:

    Sanctions eventually contributed, in part, the pressure required to end Apartheid. This is going to be tough medicine to swallow for us to start getting better.

  • Anton van Niekerk says:

    It will not be long before Ramaphala will require a commission of enquiry to visit the bathroom. All arms exports require prior approval from the government. Pick up the phone, Cyril, and ask your defence minister.

  • H K says:

    All hope in our ” president” is gone.

    Simply a professional orator , nothing more and nothing less

  • William Dryden says:

    The fact that the ship docked at Simonstown naval base and not the normal port of Cape town is in it’s self incriminating evidence that something untoward was going on, and the MOD must have known and sanctioned the docking and at night Nogg Al

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