South Africa is moving closer to recession and a possible "junk" credit rating after the rand collapsed yesterday and investors expressed a lack of faith in the ability of President Jacob Zuma's government to stem the slide. The rand suffered a "flash crash" to a disastrous R17.9169 to the dollar in early Asian trade before recovering to R16.5431 by late afternoon. The previous close was R16.3009.The 9.9% slump in the rand was the most since 2008 and the biggest among all currencies. Investors said it came from a few e-commerce-type trades in an illiquid market and followed growing concern about the state of China's economy.Macquarie Bank said the plunge in Asia might not be a one-off for the rand, which lost 24% against the yen last year.South African policy-makers are running out of options. Rising inflation risks might force the Reserve Bank to take aggressive action in tightening policy at a time when the economy is barely growing. Worsening debt levels and the threat of credit-rating downgrades mean Finance Minister Pravin Gordhan has limited room to manoeuvre."It looks like a certainty" that the economy will contract, said George Herman, head of South African investments at Citadel."We will be downgraded to sub-investment grade," he said. "Our fundamentals have been pushed over the tipping point by the dramatic weakening of the exchange rate."Bank of America Merrill Lynch yesterday cut its 2016 growth forecast for South Africa by a whole percentage point to 0.4%.Adding to the economy's crunch is the worst drought since 1992.Zuma has fuelled investor concern with erratic policy. His farcical flip-flop over the finance minister post saw the rand fall 9% and the benchmark All Share stock index lose R170-billion.At the weekend, Zuma tried a public relations fightback by citing market "overreaction" to his firing of former finance minister Nhlanhla Nene. He called criticism of his association with the wealthy Gupta family "a political thing"."Zuma's comments indicate a profound lack of understanding of how global capital markets work and how trust is built between governments and lenders," said Nic Borain, an adviser to BNP Paribas. "He's saying the rand was going down anyway and it's not his fault, but it is his fault."..