Rand Recovers as ANC and DA Revisit Coalition Talks

South Africa’s rand firmed up on Tuesday morning, rebounding from Monday’s sharp decline, as the market watched closely for signs of progress in the country’s multi-party coalition government.

At 0706 GMT, the rand was trading 1% stronger at R19.44 to the dollar, recovering some of the 2.7% it lost on Monday. The slight recovery comes as senior leaders from the African National Congress (ANC) and the Democratic Alliance (DA)—the two biggest parties in South Africa’s Government of National Unity—held closed-door meetings to resolve growing tensions.

Coalition on Shaky Ground Over Budget Dispute

The rift emerged over disagreements on the fiscal framework, with the pro-business DA voting against the proposed budget in parliament. This move sparked backlash within ANC ranks, with some members reportedly suggesting that the DA reconsider its place in the coalition.

While no official decision has been made, the DA confirmed its Federal Executive met on Monday, although the party has yet to declare its position on continuing within the unity government.

ANC Expected to Announce Coalition Stance

The ANC is scheduled to brief the media at 0900 GMT, shedding light on the outcome of Monday’s high-level discussions. Early reports from Eyewitness News suggest that the ANC has opted to continue negotiations with coalition partners, including the DA, and has initiated further talks to stabilize the government.

The political uncertainty has had a noticeable impact on the markets. However, the currency’s partial rebound indicates a degree of market confidence that the coalition might hold—at least in the short term.

Bond Market Reaction

Meanwhile, South Africa’s benchmark 2030 government bond showed modest improvement. The yield dipped by 5 basis points to 9.325% in early trading, reflecting cautious optimism among investors.

Political Stability Key to Market Performance

Analysts say the rand is likely to remain sensitive to political developments in the coming days. Any clarity on the unity government’s future will be crucial in determining investor sentiment, particularly with budgetary planning and economic recovery on the line.

For now, all eyes are on the ANC’s upcoming briefing and whether South Africa’s fragile coalition can regroup after a rough start to the year.

{Source CNBC}

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