The rand dropped an annualised 0.7 percent in the second quarter – an unexpected, far worse outcome than what was forecasted.
According to Bloomberg the recession casts a pall over the country’s new leadership. The recession provides an uncomfortable parallel between former President Jacob Zuma’s presidency and the current Ramaphosa presidency says Bloomberg.
The decline in Rand emphasizes how weak the South African economy is. The country has been dragged into the emerging market turmoil of the past month that engulfed Turkey and Argentina.
Ramaphosa’s rise to presidency since December gave the rand a boost, following the Jacob Zuma presidency. The confidence in the economic rise dropped due to economic reforms not being realised fast enough, global trade wars and turmoil in other emerging markets.
Bloomberg spoke to Elize Kruger, South Africa based economist (NKC African economies), Kruger said “it’s showing that this economy remains in the doldrums, that we are in desperate need for policy certainty and structural reform to get us into a growth plan”. The recession makes South Africa a difficult environment for job creation, the country will get stuck in a low-growth term if the recession continues, Kruger said.