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Spreading violence after Zuma jailing hits South Africa's rand

12th July 2021

By: Reuters

  

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South Africa's rand tumbled more than 2% on Monday, battered by an outbreak of violence and looting after the jailing of former president Jacob Zuma.

South Africa's Defence Force said on Monday it would deploy soldiers in the Gauteng and KwaZulu-Natal provinces to assist law enforcement agencies. Six people have been killed and more than 200 arrested in protests after Zuma was sentenced to 15 months in prison for contempt of court during an investigation into high-level corruption.

The rand slipped as much as 2.2% to 14.4825 against the dollar, closing in on a two-month soft spot it touched in early July. It last traded at 14.4675 - down 1.7% on the day.

"The outbreak of violence due to the jailing of ex-president Jacob Zuma is weighing on the rand as investors might fear an escalation," said Elisabeth Andreae, EM analyst at Commerzbank.

"Today’s hearing of Zuma’s application at the Constitutional Court to get the sentence reviewed might bring further escalation," she added, referring to a session of the country's top court to rule on a challenge by Zuma against his prison term, which began on Monday.

Compounding pressure on the rand was a fall in copper prices amid concerns over slowing growth in China as well as fears that extended, tight Covid-19 restrictions might hit the fragile recovery in Africa's most industrialised economy.

The rand has outperformed many other emerging market currencies since the start of the year, but Monday's tumble reduced its gains since the start of the year to 1.4%.

Other assets were broadly unfazed. Yields on local 10-year government bonds nudged a touch higher at 8.91% while the equity index gained 0.3%, slightly underperforming the wider emerging market stocks benchmark, which was up 0.4%.

The decision to jail Zuma resulted from legal proceedings seen as a test of post-apartheid South Africa's ability to enforce the rule of law, including against powerful politicians.

The unrest had initially been concentrated mainly in Zuma's home province of KwaZulu-Natal but over the weekend protests spread to the largest city Johannesburg.

The incarceration of Zuma has angered his supporters and exposed rifts within the ruling African National Congress.

President Cyril Ramaphosa said on Sunday there was no justification for violence and that it was damaging efforts to rebuild the economy amid the Covid-19 pandemic.

Edited by Reuters

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