Banks and retailers tumbled on the JSE and the rand extended losses as ongoing riots in some parts of the country hurt sentiment, with a number of businesses suffering serious damage and others destroyed.
The unrest, which began sporadically in KwaZulu-Natal late last week after the jailing of former president Jacob Zuma, spread to the country’s economic hub Gauteng and continued on Monday and Tuesday. Widespread looting and vandalism was seen across both provinces, while protesters blocked several major roads, setting a number of vehicles alight.
According to the SA Property Owners Association, more than 200 malls have been looted and/or destroyed so far, with at least 600 stores burned or damaged.
The JSE’s banking index plunged 4.45% on Tuesday, its worst one-day loss since December 2020 when the country was put into another strict lockdown during the height of the second wave of Covid-19.
Retailers, which exclude grocery stores and pharmacies, dropped 4.48%, while food and drug retailers fell 2.95%, the most in more than eight months.
“The market movements are a function of local uncertainty due to the unrest impacting economic prospects and consumer and business confidence. Combined with a weaker rand this will have a negative impact on equity valuations generally as well as funding costs,” said Chantal Marx, the head of investment research at FNB Wealth and Investments.
“Loan growth may be impacted by a decline in confidence and propensity to spend by both consumers and businesses in a time of unrest,” she said, adding that a lot depended on when the situation was brought under control.
The JSE all share lost 0.3% to 67,088 points and the top 40 shed 0.23%. Financials fell 3.17% and listed property 2.55%.
FirstRand led the losses in the banking sector, dropping the most in more than six months. It closed down 5.36% to R53.19..
Massmart fell the most among retailers, losing 7.53% to R56.98, its worst one-day fall in a year. Mr Price shed 5.89% to R197.90 and Shoprite tumbled 4.11% to R153.08 — the most since March.
The rand extended Monday’s losses and at 6.30pm it had weakened 1.6% to R14.6313/$, 1.17% to R17.2743/€ and 1.34% to R20.2559/£. It reached an intraday low of R14.6725/$, its weakest since April 5.
Mining stocks firmed on the day as the weaker rand boosted the sector — whose earnings are dollar-based — with precious metals firming 2.53%.
“So far, prices for most of SA’s major export commodities are unaffected by the unrest. We foresee continued weakness in the rand as markets fully digest these events, which should be a boost for mining sector export revenues, in turn encouraging mining volumes,” said Eduan Hauman, the head of metals research & SA economy at Afriforesight Commodities.
“We expect the government to do everything in its power to keep roads and ports open and squash the rioting and looting. With the defence force already deployed to assist the police, we expect disruptions to be ironed out within the next few days,” said Hauman.
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