How to trade the rand rally in 2018...

by , 11 January 2018
How to trade the rand rally in 2018...
When Cyril Ramaphosa managed to defeat Nkosazana Dlamini-Zuma and the Jacob Zuma faction for the position of ANC president, the rand went crazy.

It moved stronger by more than 10% versus the US dollar and was the world's best performing currency over the last month.

I do not argue the relief felt after the Ramaphosa win is unwarranted.
I will however say that this one change will not be enough to get out of the hole the country is currently in.
As we approach the 2018 budget announcement at the end of next month, the South African economy  remains incredibly weak with many structural problems. These will likely take years to solve.
Unemployment remains stubbornly high while growth is virtually non-existent. Tax collection has fallen, while the government struggles to rein in spending.
To make matters worse, President Zuma added to the problem by announcing free tertiary education, something that the budget cannot support.
At the same time, we are hanging on to our position in the World Government Bond Index by the slimmest of threads.
Given these factors, it seems more likely than not, that the rand rally will be temporary. 
So what should you do about it?
The good news is that exchange control limits reset at the end of 2017. That means that you currently can take out R1 million rand per person. A further R10 million can be moved offshore with just a tax clearance certificate. That’s R11 million rand per person.
At an exchange rate of R12,35/$ your R11 million would buy $890,000. Compare this to when the rand was at R14.20/$ just a few weeks ago when your R11 million would get you just $775,000. That’s a difference of over $100,000.
It would be best to move before the budget speech. That is the event in which the optimism around Ramaphosa comes face to face with the facts about the economy. In addition, there is a chance the Finance Minister will use the event to tighten exchange controls from their current levels.
The one factor against moving now is the fact that, as I write this, Jacob Zuma is still president. If he is recalled from the post by the ANC, we could see further upside for the rand.
That said, given the large moves we have already seen, plus the weak economy, it is likely any further strengthening will be limited.
If you want more advice on how to move money out of SA, contact
Viv Govender,
Wealth Manager

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