‘Election outcome could adversely affect the economy’

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The South African rand is facing significant volatility as the country approaches the general election which is due to take place next month.

Fears of political instability are said to be driving market concerns and impacting bonds, with research indicating a possibility of the ruling African National Congress (ANC) likely to get less than 50- percent of the vote for the first time since 1994.

Economists say that the economy could be adversely impacted by the outcomes of the upcoming polls.

Isaah Mhlanga is a Chief Economist at Rand Merchant Bank, “When we have elections there are generally expected to produce a potential different outcome than what we have seen before there is a rise in uncertainty and that’s what we have currently. For instance, if we look, since 1999, all the local government elections or general elections in some years have had the currency depreciate by maximum of 20- percent, driven by the outcomes of the elections. The depreciating currency means all the imports become much more expensive and therefore the prices of goods in general tend to increase and if they do increase, the central bank will then follow suit and hike interest rates.”