The South African rand is sliding to its lowest level in more than a week after the government warned of a national âcatastropheâ should its controversial land reform program fail to take place. South Africa has been under the spotlight in recent months after domestic leaders have been pressing land reform as a way to eliminate inequality and facilitate racial justice, something that has drawn international support.
In 2018, President Cyril Ramaphosa has adopted a policy of land expropriation without compensation in order to accomplish income equality and racial justice. The controversial objective has not been made into law because a constitutional amendment is still in the works and public consultation is required. But there has been an increase in violence since the efforts were first announced.
The South African government also believes that it can boost its agricultural sector and stimulate the economy by confiscating land that is primarily owned by white farmers.
Deputy President David Mabuza told lawmakers on Thursday that the incumbent regime opposes illegal land grabs, but then encouraged officials to adopt sensible land reform, otherwise the country will âslide into catastrophe.â
In addition to gaining the support of British Prime Minister Theresa May, South Africa received an endorsement from the International Monetary Fund (IMF), despite conceding that it does not specialize in land reform.
IMF senior resident representative in South Africa, Montfort Mlachila, told the press:
We are in full support of the need to undertake land reforms in order to address the issues of inequality.
There is need to have a transparent, rules-based, and constitutional process that leads to desirable outcomes. It is particularly important not to undermine agricultural production and food security.
Leaders have been championing the move as a method of advancing the economy, but the IMF does not expect South Africa to experience any substantial economic growth.
President Donald Trump recently interjected into the matter, tweeting that his administration will probe the issue:
I have asked Secretary of State @SecPompeo to closely study the South Africa land and farm seizures and expropriations and the large scale killing of farmers. âSouth African Government is now seizing land from white farmers.â @TuckerCarlson @FoxNews.
But white-owned land is far from the nationâs problems as a whole host of issues are affecting the economy and the rand. The countryâs mining sector has taken a beating, manufacturing is declining, interest rates are falling, and investors are veering away from emerging markets and diving into the US dollar.
As a result, the rand will endure its worst August performance against the greenback in history, sliding more than 9%. Also, the randâs one-month historical volatility is at its highest point since December 2016.
The USD/ZAR currency pair surged 2.59% to 14.7264, from an opening of 14.3539, at 16:41 GMT on Thursday. The EUR/ZAR spiked 2.12% to 17.1650, from an opening of 16.80790.
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