Rand steadies as focus shifts to budget

At 1525 GMT the rand traded at 17.3200 per dollar, unchanged from its previous close.

Picture: 123rf.

JOHANNESBURG - The rand steadied against the dollar in late trade on Monday as investors waited for a supplementary budget due on Wednesday that is expected to show a markedly wider budget deficit.

At 1525 GMT the rand traded at 17.3200 per dollar, unchanged from its previous close.

Finance Minister Tito Mboweni is expected to paint a bleak picture in the revised budget almost three months after the government announced a 500 billion rand ($28.87 billion) stimulus package leaning heavily on new borrowing.

A Reuters poll on Monday showed that South Africa’s consolidated budget deficit is expected to widen to a record 14% of gross domestic product this year, with the National Treasury struggling to squeeze it back to levels it anticipated before the pandemic.

“The rand is likely to see some weakness this week on the budget projections, with South Africa sinking deeper into a debt trap,” Annabel Bishop, chief economist at Investec, said in a note.

“South Africa has been borrowing to pay for its current expenditure, which includes civil servant salaries and wages, while experiencing a falling economic growth and revenue trend over the past decade.”

South African stocks showed some signs resilience on hopes of a rebound in economic activity in the country.

The benchmark FTSE/JSE all-share index was up 0.01% to close at 54,230.17 points and the top 40 companies index closed up 0.13% to 49,878 points.

As money moved globally from equities to safe-haven gold, its price surged by 0.86% on Monday pushing the JSE gold index, the index of the top five gold mining companies in South Africa, up 3.41%.

In fixed income, the yield on the 10-year government bond was up 6 basis points to 9.280%.