Rand steadies after losses from budget speech

South Africa’s rand steadied on Thursday after losses linked to the shock of a mid-term budget speech that showed still-ballooning debt and a deeper recession.

At 1548 GMT, the rand was less than 0.1% weaker at R16.41 per dollar, having slipped as low as R16.48 overnight, its worst in a week, over the bad news locally and abroad.

France and Germany went back into lockdown on Wednesday, as a massive second wave of novel coronavirus cases threatened to overwhelm Europe, rattling already fragile hopes of a global economic recovery.

Locally, the long-anticipated medium-term budget speech by Finance Minister Tito Mboweni on Wednesday disappointed, with investors saying it was short on details about the economic recovery plan.

“Finance Minister Mboweni’s moment to announce brave and sweeping reforms came and went, and still the country continues towards fiscal collapse, albeit at a lower gear,” said economists at ETM Analytics in a note.

In addition to freezing the public wage bill for three years, the treasury allocated a R10.5 billion ($649.66 million) bailout to state-owned beleaguered airline South African Airways (SAA).

Bailouts of state firms are among the biggest risk to the country’s credit ratings, which have been on the slide.

Analysts at BNP Paribas said the budget speech was not a “game-changer” for local assets.

“On balance, it should be viewed as market neutral,” said senior economist Jeffrey Schultz. “An additional diversion of state funds towards SAA was probably the most negative element.”

Stocks extended losses for the fourth consecutive day on Thursday, with global virus worries and the budget also hurting sentiment.

The Johannesburg Stock Exchange’s All-share index was down 0.79% to finish at 51,897 points after touching a five-month low in intra-day trade, while the Top 40 index was down 0.74% to end the day’s trading at 47,576 points.

The index representing the top six banks in the country was down 3.03%. The index has lost close to 8% in the last two days. Petrochemicals major Sasol Ltd dropped almost 12%.