The rand and local bonds showed little movement in reaction to the State of the Nation Address (Sona), but financial markets are likely to view the announcements as being broadly positive
This is according to Sanisha Packirisamy, economist at Momentum Investments.
“The success of these interventions rely heavily on government funding and as such the upcoming national budget plays a pivotal role in getting the ball rolling on the implementation of these announced plans."
Packirisamy said the Sona emphasised the risk that insufficient energy supply poses to growth and investment in the economy.
“It also noted the need to arrest the deterioration in basic service delivery rolled out from defunct municipalities. As part of the ruling party’s larger renewal campaign, government acknowledged the widening trust deficit between itself and other key stakeholders in the economy, as is evidenced by slow progress in socio-economic development. It further highlighted the shortcomings of our law enforcement agencies, which have led to a rising level of lawlessness in the country,” she said.
At 8:18am on Friday, the rand traded at 17.7725 to the dollar, close to its previous close of 17.7850.
The government's benchmark 2030 bond was weaker in early deals, with the yield up 5.5 basis points at 9.815%.
“Reducing policy uncertainty and fast-tracking the implementation of structural reforms that have wide-reaching benefits to improve the country’s growth trajectory and jobs outlook require a broader political consensus on what is needed to fix South Africa’s ailing growth rate,” Packirisamy told Business Report.
"In our view, garnering positive consumer, business and investor sentiment requires a concerted effort to align interests between government, business, labour and civil society. The Sona highlighted that as a country we have not yet achieved this. Nevertheless, the intention remains to conclude a social compact so as to enact joint action in a number of areas that are central to growing the economy,“ Packirisamy said.
BUSINESS REPORT