South Africa is the
second-largest economy in Africa, with a GDP of more than $350 billion and a
population of more than 56 million people. In recent years, the country has
seen a number of challenges, that have seen its GDP slow down for a number of
years. As a result of the slowing GDP, the country was passed by Nigeria, which
became the biggest economy in the continent.
Today, investors may focus on the
country as it goes to an election. This will be the first election after the
previous president, Jacob Zuma, was removed from power. He was replaced by his
then vice president, Cyril Ramaphosa. As the ‘coup’ happened, many investors
became more optimistic about the country and Foreign Direct Investment (FDI)
rose. This is because with Zuma out, they expected Ramaphosa to apply his
business skills to run the country.
The key contestants for president
today will be Cyril Ramaphosa, who will vie on the Africa National Congress
(ANC) party. His key opponent will be Mmusi Maimane, who is vying on the
Democratic Alliance party. The other opponent is Julius Malema, who is vying on
the Economic Freedom Fighters party. Still, Ramaphosa is expected to win.
Ahead of the general election,
the country has released mixed economic data. In April, data showed that the
core CPI rose by an annualized rate of 4.4%, which was lower than the expected
growth of 4.5%. The headline CPI increased by 4.5%, lower than the expected
4.6%. Before that, data showed that the manufacturing production declined by
1.8% while the mining production declined by 7.5%. On a positive note, the
retail sector improved by 1.1% while the PPI increased by 6.2%. The trade
surplus increased to R 5 billion in March.
Ahead of the elections, the South
African rand has been a bit volatile as evidenced by the Average True Range
(ATR) indicator shown below. The pair has remained within the channel shown
using the green lines below. The price is also slightly below the 21 and 50-day
moving averages. The pair may be likely move lower if Ramaphosa wins the
election. If it does, it is likely test the important support of 14.20.
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