The rand tumbled against major currencies on Monday as riots over former president Jacob Zuma’s arrest sprung up in KwaZulu-Natal and Gauteng — disrupting public transport and forcing businesses to close their doors for fear of looting.
The local currency dropped by as much as 2% against the dollar, with the market rattled by the protests, which turned violent at the weekend, causing havoc in various parts of KwaZulu-Natal and Gauteng, the country’s economic hub.
At least six people have died in the wake of the protests and hundreds have reportedly been arrested. Covid-19 vaccination sites in both provinces have had to be temporarily closed.
Initially believed to have been started by Zuma supporters in his home province of KZN who were angered by his incarceration for contempt of court, the protests have spread across the country and taken the form of indiscriminate vandalism and looting. Zuma began a 15-month sentence last week after he was found in contempt of a Constitutional Court order to testify before the Zondo commission investigating state capture.
In a research note, Investec chief economist Annabel Bishop said while there had been some police response to the violence, “other areas have seen a dearth of consequences” and that if they continue unchecked, the protests would negatively impact South Africa’s overall economic activity, business and consumer confidence in the third quarter of the year.
“The risk is that the collapse of law and order spreads across the entire country, shutting off the economy and making it much more difficult to roll back from the initial violent outbursts,” Bishop said.
“These losses faced by the private sector, the volatile situation, if not rapidly brought under control, will impact investor sentiment soon and destroy the hard-won gains in the Ramaphosa presidency if it approaches civil war.”
The economy was already buckling under other pressures such as load-shedding and, most recently, the extension of lockdown measures in response to the spread of the doubly infectious Covid-19 Delta variant, Lings noted, adding: “Now we are in level four for at least four weeks. And even if you start to ease off, it’s still going to take a number of weeks before confidence has returned. So that on its own is undermining third-quarter performance.”
Lings said the looting would put economic activity on hold, with people adopting a wait-and-see attitude.
“Businesses are going to be unsure about reopening … They are obviously going to be reluctant to restock shops, because they don’t know whether the looting will return. You’ve got destroyed infrastructure in the shopping centres, so that in itself is going to take time to repair. And obviously, businesses will not be willing to now increase employment or become expansionary in any way,” he said.
Any gains made in the first quarters of the year, such as the restructuring of state-owned entities and the Covid-19 vaccination roll-out, could be undone, the economist added.
“That has now shifted dramatically. Now we are talking about downgrades to South Africa’s economy, more job losses, another wait-and-see situation in terms of any further investment and employment. And clearly the situation could get further out of hand, if it is not managed correctly,” he said.