The South African rand weakened on Wednesday following the eleventh-hour postponement of the national budget due to internal disagreements within the coalition government.
By 15:05 GMT, the rand traded at 18.565 against the U.S. dollar, marking a 0.9% decline from its previous close.
Finance Minister Enoch Godongwana confirmed that the budget speech was delayed to allow further discussions, with a revised proposal expected in March. The Democratic Alliance (DA) attributed the delay to its opposition to an African National Congress (ANC) plan to increase value-added tax (VAT) by 2 percentage points.
Following its loss of a parliamentary majority last year, the ANC now relies on coalition partners to pass the budget, with the DA as its key ally.
Market analysts noted that while the delay sparked initial volatility, the reaction was likely temporary.
“While the lack of cohesion raises concerns about the government’s ability to reach consensus, the Government of National Unity (GNU) remains intact and actively negotiating. This suggests that despite the challenges, the process is still functioning,” said Danny Greeff, co-head of Africa at ETM Analytics.
Investors had been anticipating the budget speech for insight into the coalition government’s fiscal strategy, debt management plans, and economic reforms. The delay led to the sharpest selloff in government bonds since December, with the 2052 dollar bond dropping roughly 1 cent to 89.20 cents on the dollar.
Jurgen Eckmann, a wealth manager at Consult Advisory Group, suggested that market sentiment could recover once the budget is officially tabled.
“When the budget is finally presented in March, we will hopefully see a stronger, more balanced budget that reflects broad consensus,” Eckmann said.
Meanwhile, the Top-40 index (.JTOPI) closed 0.8% lower, and South Africa’s benchmark 2030 government bond weakened, with its yield rising 5.5 basis points to 9.18%.
-reuters