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29 March 2017

Commentary by Gareth Frye

Facts are scarce, rumours are aplenty as ‘Gordhandate’ appears to approach its climax. Finance Minister Gordhan’s axing is by no means a done deal, with the political game of chess as complicated as ever. There are 2 probable outcomes;

  1. Stalemate: President Zuma is prevented from removing Minister Gordhan, instead remaining silent as the issue slowly passes with the rand gradually normalising
  2. Gordhan fired: This scenario opens up even more unanswered questions, with Gordhan’s replacement the key. If Zuma gets it wrong I could lead to his demise, or a major split with the ruling party. If played correctly, the President will emerge victorious, stronger than ever leading up to the ANC’s December elective conference.


What is the likely outcome for the rand?

It’s important to look at the facts and past history, straying from emotion, fake news and hysteria. Nenegate saw the rand lose 15% over the preceding month (December 2015). If we apply the same train of thought, the rand could end up near 14.20/$. But its 2017, and the rand’s fundamentals are vastly different to that of 2015. The rand is in a strengthening cycle (weakening in 2015), SA’s current account has narrowed sharply, commodity prices have stabilised and GDP prospects are improving. Nenegate accelerate the rand’s weakening trend, where Gordhangate will be working against a strengthening cycle.

The rand has lost 5% since last week, but in a more favourable climate rand losses from a Gordhan axing should be significantly smaller. A further 5% weakness could see the rand test 13.60/$. If news emerges that Gordhan will be keeping his job, we could see the rand snap back to 12.50/$.

Either way this is yet another massive own goal for Team SA. If only Bafana’s strikers were this prolific?