JOHANNESBURG, July 12 (Reuters) – South Africa’s rand tumbled more than 2% on Monday, battered by an outbreak of violence and looting after the jailing of former president Jacob Zuma.
The government deployed soldiers on the streets to quell violence that has left at least six people dead and more than 200 arrested after Zuma was sentenced to 15 months in prison for contempt of court during an investigation into high-level corruption.
The rand slipped as much as 2.2% to 14.5025 against the dollar, close to a two-month weak point it touched in early July. It traded at 14.4175 at 1500 GMT – down 1.51% on the day.
“The outbreak of violence due to the jailing of ex-president Jacob Zuma is weighing on the rand as investors might fear an escalation,” said Elisabeth Andreae, emerging market analyst at Commerzbank.
“Today’s hearing of Zuma’s application at the Constitutional Court to get the sentence reviewed might bring further escalation,” she added, referring to a session of the country’s top court to rule on a challenge by Zuma against his prison term, which began on Monday.
Compounding pressure on the rand was a fall in copper prices amid concerns over slowing growth in China as well as fears that extended, tight COVID-19 restrictions might hit the fragile recovery in Africa’s most industrialised economy.
The rand has outperformed many other emerging market currencies since the start of the year, but Monday’s tumble reduced its gains since the start of the year to 1.4%.
Other assets were broadly unfazed. Yields on local 10-year government bonds nudged a touch higher at 8.89%, while the benchmark equity index gained 1.43%. The All-share index climbed 1.37%.
“This (violence and looting) is very short term as far as the markets are concerned. This isn’t going to continue for weeks and months, we’re probably over the worst already,” said Wayne McCurrie, portfolio manager at FNB Wealth and Investments.
Hotel and casino owner Sun International topped the gainers, jumping 8.11%, while peer Tsogo Sun Hotels rose 3.28% and owner of fast food chains Famous Brands gained 5.79% after President Cyril Ramaphosa announced on Sunday that restaurants will be allowed to open again.
The decision to jail Zuma resulted from legal proceedings seen as a test of post-apartheid South Africa’s ability to enforce the rule of law, including against powerful politicians.
The unrest had initially been concentrated mainly in Zuma’s home province of KwaZulu-Natal (KZN) but over the weekend protests spread to the largest city Johannesburg.
The incarceration of Zuma has angered his supporters and exposed rifts within the ruling African National Congress.
Ramaphosa said on Sunday there was no justification for violence and that it was damaging efforts to rebuild the economy amid the pandemic.
(Reporting by Olivia Kumwenda-Mtambo, Karin Strohecker and Nqobile Dludla Editing by Mark Heinrich and Mark Potter)