South African Rand Weakens as Coalition Budget Talks Stall

The South African rand slipped early on Tuesday as last-minute negotiations between the African National Congress (ANC) and Democratic Alliance (DA) over the deadlocked budget dragged on, just hours before a crucial parliamentary committee was set to debate it.

Uncertainty Over Budget Deal

Local reports on Monday had suggested that the ANC and DA—the two largest parties in South Africa’s coalition government—were nearing an agreement to pass the budget. However, DA leader John Steenhuisen dashed those hopes on Tuesday, stating that no deal had been finalized and his party would oppose the budget without a written agreement.

Meanwhile, the ANC’s chief whip remained optimistic, claiming there was “sufficient consensus” to clear the first parliamentary hurdle—approval by the Standing Committee on Finance later in the day.

Market Reaction

By 0655 GMT, the rand had weakened by 0.2%, trading at 18.36 against the dollar, reversing some of Monday’s gains when optimism over a potential deal had lifted the currency.

The rand is known for its volatility during periods of political uncertainty, and the prolonged budget standoff has kept traders on edge. Investors are also weighing external risks, including global trade tensions and U.S. tariff policies under a potential Donald Trump reelection.

What’s Next?

Later on Tuesday, South Africa will release its Purchasing Managers’ Index (PMI) for the manufacturing sector (0900 GMT), which could provide further clues on economic health. Meanwhile, the benchmark 2030 government bond saw slight gains, with yields dipping 1.5 basis points to 9.08%.

As coalition partners scramble to break the deadlock, markets remain cautious. If the budget fails to pass, it could trigger deeper political instability and further pressure on the rand.

{Source Business Recorder}

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