ANC will deal with Jonas issue ‘head on’: Mantashe

17 March 2016 - 10:57 By Franz Wild, Rene Vollgraaff
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The African National Congress will deal with Deputy Finance Minister Mcebisi Jonas’s claims about influence peddling by the Gupta family “head on,” party Secretary-General Gwede Mantashe said.

The government is concerned about the country’s degeneration into “a mafia state” and “won’t cleanse the narrative,” Mantashe said by phone, adding he expected further revelations on the matter.

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Jonas on Wednesday said the Guptas personally offered him the job of taking over the finance ministry, the latest in a series of embarrassing revelations linked to President Jacob Zuma that have led opponents and allies alike to question his judgment.

Undermining confidence

The current political turmoil is undermining investor confidence in the country and hitting everything from the rand to interest-rate bets.

After gradually gaining ground in March, the rand weakened 2.6% against the dollar on March 15 after the Hawks said it will force Finance Minister Pravin Gordhan to cooperate with their investigation of the tax agency, which he had led before 2009. A day later, the rand reversed losses after a deputy minister said he was offered the finance minister’s post by the Guptas.

Standard Chartered Plc on Wednesday changed its forecast for Thursday’s interest-rate decision to a 50 basis-point increase, from an earlier prediction of no change. Recent developments have been a key factor in the revised view, Razia Khan, head of the bank’s Africa economic research, said in an e- mailed note to clients.

At the end of last week, traders were pricing in a 55% chance the Reserve Bank will increase the repurchase rate by 25 basis points to 7%. That probability increased to 79% on Wednesday, according to forward-rate agreements starting in one month, used to speculate on borrowing costs.

The rand fell 0.4% to 15.7282 against the dollar as of 8:40 a.m. in Johannesburg on Thursday. Yields on the rand bonds due 2026 gained 5 basis points to 9.47%.

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Reserve Bank Governor Lesetja Kganyago is contending with inflation above the 3% to 6% target band and an economy that’s set to grow less than 1% this year. The Monetary Policy Committee raised the benchmark interest rate by half a percentage point in January.

The rand, which has dropped 3.2% against the dollar in the past three months, is still recovering from the market fallout in December when Zuma unexpectedly fired Nhlanhla Nene as finance minister in favor of a little-known lawmaker. The president backtracked four days later and reappointed Gordhan to a post he had held from 2009 until 2014.

Moody’s Investors Service is reviewing South Africa’s credit rating this week for a possible downgrade to one level above junk.

A weakening in South Africa’s institutions may put the rating at risk, “with potentially negative implications for the rand,” Khan said. “The Reserve Bank is likely to be sensitive to this risk, especially given the vulnerability of the inflation outlook to further rand weakness.”

- Bloomberg

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