Meanwhile the games played by the EFF to try and nationalise the South African Reserve Bank are also not helping the battling currency.
A reports by news agency Reuters cites the Institute of International Finance (IIF) – which tracks financial flows – and comes to the conclusion that the exodus of investment money this week has largely been concentrated in South Africa and China – amounting to $600 million (R8.7 billion) and $500 billion, respectively.
However, says BusinessTech.co.za, India has also turned negative this week as debt flows reversed, and Malaysia, Indonesia, Korea, Philippines, Korea and Vietnam have all seen money leave teken from stocks and bonds.
The IIF said in its report that turbulence, amid heightened tensions between the U.S. and Turkey, “has clearly weighed on investor appetitive for emerging market assets”.
South Africa’s reliance on portfolio debt and equity flows to finance its large and widening current account deficit has amplified its moves, it added. Nearly 80% of foreign investor flows to South Africa since 2015 have been in the form of portfolio investment — buying assets like bonds or shares. Direct investment, such as building a factory, accounted for less than 10 percent of total inflows.
“The impact of market strains is likely to be most acute for countries with relatively large external financing needs,” the IIF said.
As a result the rand has been taking a beating against major world currencies.
Meanwhile the rand slipped further on Friday and touched the 15 mark against the US dollar – the second time this week – as the Economic Freedom Fighters (EFF) tabled a bill in parliament to nationalise the South African Reserve Bank (SARB).
Analysts said the threat to the independence of the SARB will not be viewed favourably by investors nor credit ratings agencies.