Uncertainty around Cabinet delay starts to spook rand
The rand weakened in early trade on Tuesday, with uncertainty around the makeup of South Africa's Cabinet starting to filter into the forex market as the UK and US returned from public holidays on Monday.
At 09:15 the local currency was trading at R14.52/$, down 0.7% on the day. The rand opened at R14.42 to the greenback, after trading in a tight range on Monday.
"The rand this morning is trading from the back foot," said Andre Botha of TreasuryONE in a note to clients. "This could be due to local factors as news has been filtering [through] about Cabinet reshuffles and the fact that the Eskom CEO did resign over the weekend."
The state power utility's head Phakamani Hadebe announced late on Friday night that he will step down at the end of July. In a statement, he said that running the debt-laden utility came with "unimaginable demands which have unfortunately had a negative impact on my health."
Botha said Hadebe's resignation will place further scrutiny on the energy supplier and could be seen as a rand negative. "With the delay of the Cabinet, it has caused a bit of uncertainty and the rand gets easily spooked by uncertainty."
South Africans are still waiting for President Cyril Ramaphosa to announce his Cabinet, which is expected to take place later in the week.
African National Congress deputy president David Mabuza, meanwhile, is set to be sworn in as an MP on Tuesday. This paves the way for his possible reappointment as the country's deputy president.
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