South African Rand Slips on Stronger Dollar, Local Election Vote Count Advances

South Africa’s rand weakened against the U.S. dollar on Friday as the greenback strengthened globally and vote counting continued following the country’s municipal elections.

At 0655 GMT, the rand traded at 16.5275 to the dollar, down 0.3 per cent from its previous close, according to Reuters.

The dollar gained more than 0.3 per cent against a basket of major currencies, supported by demand for safe-haven assets following a global sell-off in artificial intelligence-related stocks.

The currency movement came as investors monitored the outcome of South Africa’s November 4 local government elections, with early results pointing to a significant decline in support for the governing African National Congress (ANC).

With 72 per cent of votes counted, the ANC had secured approximately 32 per cent, compared with 46 per cent in the 2021 municipal elections.

Its closest rival, the Democratic Alliance (DA), was on about 24 per cent, according to Electoral Commission data.

The results could have implications for political control in major metropolitan areas, where fragmented voting patterns are likely to make coalition negotiations necessary.

Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research, said the key economic consideration was whether the elections would produce more stable municipal administrations, improve service delivery and create a stronger environment for businesses.

Political uncertainty at the local government level is particularly relevant to investors concerned about infrastructure, municipal finances and the reliability of essential services.

South Africa’s benchmark 2035 government bond also weakened slightly in early trading, with its yield rising 4.5 basis points to 8.33 per cent.

The rand’s performance reflects the influence of both international currency movements and domestic political developments, although the stronger dollar was the immediate pressure on the currency during Friday’s trading session.

Investors will continue monitoring the election results and subsequent coalition negotiations for indications of political stability and their potential impact on South Africa’s economic outlook.