It seems as though Ramaphosa winning the Presidency was a battle, and the war has only just begun. This week provided the South African populous an insight into how divided the ANC is. A prime example of this division came when Ace Magashule, the Secretary-General, of the ANC, made comments on expanding the Reserve Bank’s mandate, only to have Enoch Godongwana, Tito Mboweni, Lesetja Kganyago, and the President refute these claims. So as of now, the South African people are left confused with what the plan is, who is running it, and what our leadership is attempting. This factional battle, together with the very poor Q1 GDP number, has left the rand significantly weaker.
- The IMF’s Managing Director, Christine Lagarde, said in an interview with Reuters that the IMF did not anticipate that the current Trade Wars would create a global recession, but did say that the tariffs are going to slash global growth in 2020.
- A former Chinese Minister has said that a quick trade deal between the US and China is unlikely, he provided a three to five-year estimate of the trade war between the world’s two largest economies.
- Donald Trump has continued to threaten Mexico with tariffs this week, saying that “not nearly enough” progress had been made in the negotiating talks so far. It does seem like the US will delay the 5% tariff implementation set to take place on Monday.
- As expected, the European Central Bank left policy rates unchanged this week.
- Fed Chair Jerome Powell on Tuesday said the central bank would respond appropriately to ongoing trade tensions, dropping his “patience” stance to policy setting, hinting that a rate cut may be appropriate to support growth. Global markets received this very well and it was a catalyst for a significant turnaround in global sentiment.
- Fiat Chrysler Automobiles NV withdrew from its offer to combine with Renault SA. This came after the board of Renault postponed their decision on the deal for the second time. Both shares in the companies fell on the news, Renault by 8% and Fiat by 3.8%.
- On Tuesday, Ace Magashule said that the ANC had agreed to expand the Reserve Bank’s Mandate, saying that, “The National Executive Committee lekgotla (meeting) agreed to expand the mandate of the South African Reserve Bank just beyond price stability, to include growth and employment.” The rand reacted negatively upon the news due to concerns over the independence of the South African Reserve Bank. Follow this link for more.
- As mentioned above, the rand has had a trying week on the back of the news that the economy contracted by 3.2% in the first quarter of 2019, and the political dispute this week regarding the Reserve Bank. It weakened to its worst levels against the US dollar since October last year – R14.94/$ at the time of writing. The global uplift in sentiment and the rand weakness had buoyed the JSE, however, as it recovered by 4.4% for the week.
- In our article we included last week, Professor Ivor Sarakinsky described how he felt that Ramaphosa was weak within the ANC. This played out this week as Ace Magashule drew further battle lines. We remained concerned about the structural weakness that this brings to the rand and the local stocks.
- During a panel discussion hosted by Investec, the Governor of the Reserve Bank, Lesetja Kganyago, said that quantitative easing is not an option for South Africa because the country’s interest and inflation rates are too high for it to work here.
- Chief Executive Officer of South African Airways, Vuyani Jarana, resigned over the weekend, saying that it was due to a lack of government support.