The rand retreated significantly yesterday, falling to a two-month low as violent protests and industrial-scale looting in KwaZulu-Natal and Gauteng dealt a severe blow to investor confidence.
Industrial activity ground to a halt yesterday as stores closed, with many businesses fearing falling prey to criminal elements.
The rand plunged more than 2 percent during intraday trade, touching R14.51 to the dollar, before closing 0.17 percent weaker at R14.41 by 5pm yesterday.
Market analysts said the domestic currency was heavily affected by the outbreak of violence after former president Jacob Zuma was imprisoned for 15 months.
Citadel Global’s Bianca Botes said Zuma’s arrest would not affect the rand, but the violence and looting that has followed would hit the economy.
Botes said it might come as a surprise to many that the arrest of Zuma, although a positive sign for local sentiment, has had no significant impact on the rand.
“In reality, Zuma’s arrest has been overshadowed by the real economic hurdles South Africa will continue to face, whether he remains behind bars or not, alongside global factors such as reflation, stimulus and global growth.
“While the national tension will bring negative sentiment, it will not be responsible for a dictation of the direction of the rand – it will merely be one of the factors contributing to it, among many others.”
The economy was faced with a spike in Covid-19 infections during a third wave of the pandemic, while the vaccination roll-out dithers.
As political tensions and riots escalated, the transportation of goods and other vital industries were suspended, including the vaccination of the current cohort of people above 50 years.
The SA National Defence Force has been deployed to KwaZulu-Natal and Gauteng to help quell the violence.
The situation remained volatile yesterday as shops and factories were looted in acts of wanton destruction not seen in the country’s 27 years as a democracy.
Business said the anarchy had caused significant damage, and the violence and destruction of property continued to cause severe losses to the economy.
Business Unity SA chief executive Cas Coovadia said the job losses that would result from businesses not having the confidence to continue operating would exacerbate the high rate of unemployment.
“These events are being reported on globally, resulting in significant loss of confidence in our country as an investment destination
“The economic damage, because of anarchy by a small group of people, will be long-lasting and will be felt broadly, particularly among those who are already under severe stress.”
Business Leadership SA chief executive Busi Mavuso called on the security cluster to deal decisively with the acts of criminality.
“This is inflicting further damage to the economy, which is already teetering
on the brink of becoming a failed state, further exacerbated by lockdown restrictions,” she said.
Agri SA appealed to the Presidency to declare a state of emergency to bring an end the wave of criminality.
“Looting of shops, stoning of cars, blocking of roads, burning of trucks and crops and theft of livestock are posing a serious threat to food security in the country,” said Agri SA executive director Christo van der Rheede.
“South Africa runs the risk of people not being able to buy or access food, he said.