Cash shifting overseas at a rate not seen since the end of Apartheid

The amount of money flowing out of South Africa has entered its longest run since 1999.

According to central bank data, South African investors are shifting cash overseas at the most-sustained pace since outflows triggered by the end of apartheid as political upheaval undermines confidence in the continent’s second-biggest economy.

Money was left the country for the 16th consecutive quarter in the final three months of 2015, the longest streak of quarterly outflows since the five years through September 1999.

Andrew Rissik, Managing Director of foreign-currency trading at Sable Group Ltd discusses this trend.

We noticed a very big change last year, when we began seeing outflow growing exponentially versus the inflows.

Andrew Rissik, Managing Director of foreign-currency trading at Sable Group Ltd

It really started to run in the third quarter, when talks of a downgrade and Nkandla became the big issue, and then the Nene debate was the final straw, and we saw a big surge in December

Andrew Rissik, Managing Director of foreign-currency trading at Sable Group Ltd

Such sustained rand outflow from South Africa have not been witnessed in decades.

I refer to it as the perfect storm, and a perfect storm that has been going on for a while. it is not just the politics, it is also emerging markets, and the other big issue is commodities. Those are the three issues.

Andrew Rissik, Managing Director of foreign-currency trading at Sable Group Ltd

Rissik says that commodity prices have possibly reached the bottom of the cycle and will start an upturn, though it is hard to predict when exactly. Also, he says a lot of this is a result of the rand being undervalued.

There are some positive signs, he says, with the Constitutional Court ruling and other actions being taken to stabilise things politically.

It has definitely been an overreaction, and devaluation was indicative of that. And sadly most individuals panic.

Andrew Rissik, Managing Director of foreign-currency trading at Sable Group Ltd

This article first appeared on 702 : Cash shifting overseas at a rate not seen since the end of Apartheid


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