The rand held steady on Tuesday, while the JSE pared the session’s gains as investors assessed disappointing local GDP numbers.
Data from Stats SA shows the economy registered a decline in the third quarter, contracting 0.3% while the market had expected growth of 0.5%.
A steep 28% decline in agriculture was the biggest driver. Without that, the economy would have grown 0.4%. The latest quarterly numbers seem to dash hopes the economy could pick up the pace to grow at 1% or more for the full year.
The huge drop in agriculture was attributed to a decline in field crops, with the maize crop down due to drought conditions.
“The unexpected and disappointing GDP growth figures confirm the extent to which SA’s growth prospects remain vulnerable to negative factors such as adverse weather conditions, weakened exports and other lagging sectors,” said North-West University Business School economist Raymond Parsons.
“The negative economic and other factors in [the third quarter] have clearly outweighed the positive ones. To the extent that tough climatic circumstances have made agriculture the largest negative contributor to lower growth, there is potential for a future turnaround if weather conditions improve [soon].
“SA’s economic recovery is evidently slow and uneven. Looking at the bigger picture, these negative growth trends confirm why the GNU policy of seeking higher, inclusive, job-rich growth must remain the overriding priority,” said Parsons.
“The clear message of the [third-quarter] GDP figures is to reinforce the need for the public and private sectors to urgently expedite the implementation of growth-friendly economic reforms.”
The JSE all share gained 0.1% to 85,818.8 points, with major indices mixed, while the top 40 was little changed.
Investec economist Lara Hodes said that despite the third quarter’s “disappointing result” they expected a rise in GDP in the fourth quarter, with “meaningful upside in growth” in the medium term.
“The hastened implementation of key reforms by the new GNU is however imperative to lift sentiment, driving a sustainable increase in growth,” Hodes said.
The rand held on to the gains on the day, staging a mild recovery after US president-elect Donald Trump’s threat to impose 100% tariffs on imports from Brics countries, effectively blocking them from US trading, if they proceeded with plans to introduce their own currency and move away from the dollar.
TreasuryOne currency strategist Andre Cilliers said Trump’s tariff threat lacked substance.
“While Trump’s rhetoric on imposing 100% tariffs on Brics+ countries created initial uncertainty, its practical implications are limited,” said Cilliers. “A Brics+ currency remains theoretical, with significant barriers to adoption and liquidity generation in global markets.”
At 5.52pm, the rand had strengthened 0.16% to R18.0978/$, while it was a little changed at R19.0283/€ and R22.9229/£.
“The upcoming US nonfarm payrolls will shape the near-term rand direction,” said Cilliers.
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