SA's govt of national unity a boon to dollar - !Gawaxab
Bank of Namibia (BoN) governor Johannes !Gawaxab says the resurgence in the South African rand could improve Namibia’s current account deficit, following a decision taken by the African National Congress (ANC) to coalesce with the Democratic Alliance (DA) and form a government of national unity (GNU).Six political parties have signed up to join the coalition after the ANC lost its majority in the 29 May vote.
According to !Gawaxab, the GNU was deemed largely market-friendly, and was a boost for the rand to which the Namibian dollar is pegged on a one-to-one basis.
“It has got definitive balance-of-payments implications. If the currency strengthens, it is not good for exports, however, it is a welcome development from an import point of view. And normally as a nation, we run a trade deficit. Our current account is constantly in deficit. We are a net importer and it is a welcome development from that perspective,” !Gawaxab said.
“It also has implications on our reserves. Our reserves are at quite a good spot, so it has a positive impact to the extent that it relates to the unrealised gains,” he added.
Reactions to the GNU
“The domestic currency saw volatility around South Africa's elections on investor uncertainty, but it has now strengthened... as the establishment of a new government has proceeded peacefully and successfully,” Investec's chief economist Annabel Bishop said in a research note.
On the Johannesburg Stock Exchange, the blue-chip Top-40 index gained, ending 3.3% higher, while the broader all-share index closed up 3.5%. South African shares were propped up by the banking sector (.JBANK), which was up 7.34%.
"At long last [South African] shares are flying... Political situation most welcomed by market," Wayne McCurrie, portfolio manager at First National Bank, said on X.
- Additional reporting by Reuters