SA rand slipped on Monday, to 0.93% weaker than its previous close at 16.7500 to the dollar. On Tuesday morning it steadied and firmed as the US$ paused. But then, ahead of the expected GDP numbers from South Africa, the rand started retreating again. Just ahead of the results coming out, the rand traded at 16.86 to the dollar.
SA rand value slides again with GDP for the second quarter of 2020 released
Stats South Africa reported on Twitter at 11.30 am local time, that “The primary (-59,1%), secondary (-72,0%) and tertiary (-40,0%) sectors contracted in Q2:2020.” According to the SAStats Website, “This contraction dwarfs the annualised slowdown of 6,1% recorded in the first quarter of 2009 during the global financial crisis.”
The site also explained that “historical data from 1960, sourced from the South African Reserve Bank, show that the second quarter of 2020 experienced the biggest fall in GDP since that year.” While tourism took a huge hit, agriculture “seemed relatively unaffected.” As anticipated, consumer spending on travel and hotels, and entertainment fell. But, they spent more on communications.
9 out of 10 industries contracted in Q2:2020.
— Stats SA (@StatsSA) September 8, 2020
Predicted bad news confirmed
EWN reported that Reuters forecast a poor GDP result might extend the “recession that pre-dated the COVID-19 crisis.” And it looks likely. After all, the outlet anticipated a contraction of 40+ percent, and SA ended up within those projections. Nine out of 10 industries contracted. Trade dropped by 41 billion rand, and manufacturing by R32 billion. Apparently, a large chunk of business got lost as a result of the alcohol ban.
One commenter on Twitter noted, “Wow, we are deep deep trouble.” And, Nasdaq reported earlier today, that the third quarter hope for an accelerated economy might not go as hoped. That’s mainly due to anticipated load-shedding which “strains business activity.” While the rand didn’t instantly plunge into freefall after the results, it doesn’t look like likely to gain right now. Just before midday, it traded at 16.89.
We reported that the rand remains very volatile, and after the ANC power struggle last week, it started swinging like a Yo-Yo. The COVID-19 corruption reports already rocked the confidence of investors in South Africa.