Some economists say rand's tumble caused largely by budget postponement
The rand began the day trading at R18.33 cents to the dollar and by 4pm it had dipped to R18.57 cents.
Parliament adjourns proceedings of the delivery of the budget speech by the Minister of Finance on 19 February 2025. Picture: Supplied/Parliament
JOHANNESBURG - Some economists believe the rand's weak performance against the US dollar has been caused by the postponement of the budget speech on Wednesday.
The rand began the day trading at R18.33 cents to the dollar and by 4pm it had dipped to R18.57 cents.
Economist Azar Jammine said the currency had already weakened before the unprecedented postponement was announced.
He said this was likely caused by leaks the finance minister would be announcing a two percentage point increase in Value-Added Tax (VAT).
READ: Steenhuisen confirms disagreements over VAT among reasons for budget speech postponement
"But it hasn't actually collapsed the way one might have expected it to do in the wake of this standoff and that is because ironically many people might see this as a reflection of the vibrance of the GNU [Government of National Unity] and the fact that South Africa is proving to be a truly democratic society than many other countries in the world. Going forward, much will depend on how international investors view this. There are some positives and negatives. The fact the government is intent on raising taxes in order to limit the rise in the public debt, might be received positively by some. On the other hand, the situation does reflect the kind of conflict sa has between populist elements that want to see government spending on a whole lot of social programmes when the money is not available there."
Senior economist at PwC, Xhanti Payi saidwhile many factors contribute to currency fluctuation, the postponing of a budget is definitely a huge contributor.
Payi said the rand's future will depend on how the market reacts over the next few days.
"We have a sense of what the budget would have looked like. Now whether or not people are looking at the market. Clearly government is concerned about debt and they were willing to increase VAT, that may be something people would be looking at positively. There are a lot of things people still need to absorb because the minister didn't deliver the budget and I sense that what we have heard now is shock and uncertainty."