For his outlook for currency performance on the continent in the year ahead, CNBC Africa is joined by Andre Cilliers, Currency Strategist, TreasuryONE.
And now for a quick review of Southern African currencies, we're looking at the Rand, Zambia's Kwacha and Mozambique's Metzical, which have faced significant pressures in the recent months from monetary policy shifts to global economic uncertainty and also in unique challenges within each one of those political or climate. So as we review those currencies, we want to have a look at the factor that drove the currency. We're also going to expand our conversation perhaps to Donald Trump's return to US presidency. Let me invite my guest to join us for this conversation, Andre Cilliers, Currency Strategist at TreasuryONE. Andre, thank you so much for making the time to see us. Very interesting times for the currencies in the southern region, but very different challenges as well. Perhaps you can take us through some of the key ones from a South African perspective and then for Zambia and Mozambique. Okay, thank you very much and an absolute pleasure to be here and good afternoon to all the viewers. So the stage is set. Eight years ago the stage was also set and there was a new role or a new actor, if we can put that into inverted commas, that came onto the stage as the main player. It's eight years later and he's about to enter the stage again and the premiere starts on Monday. So Donald Trump is the main player in this stage show that's going to take place over the next couple of years and hence everything that he represents as in such a whole American economy, the biggest economy in the world, will take absolutely the foreground on this. On the side we have also other role players that's going to change soon, like in Germany. I doubt whether the current president in Germany or the chancellor will actually make it, so there's changes there. There's turmoil in France, their government not very stable. There's changes that might take place in Canada soon, so interesting politics throughout the world. A Chinese economy that seems to be coming a little bit out of the growth slump that they've had and battling to coming out of COVID for the last five years and these are some of the main things. Locally in South Africa we have a situation where our fundamentals is actually fairly sound at this stage. We have a minister of finance that seems to be staying on the path of fiscal discipline. We have a central bank that's very prudent on how they manage monetary policy. We definitely have seen a heck of an improvement in our load shedding situation, where we haven't had load shedding since before the elections. We've got a bit of a water crisis, but that seems all set to be addressed. Compounding to that problem at this point in time is the whole situation in Lesotho Island's water project, where part of that was closed down, but will come on stream later during the year. We have seen that there is definitely work on the railway side to get that in a better order, so that will positively contribute to exports. So fundamentally we're looking okay. The GNU is still intact and everything seems to be going smooth. Road figures and everything seems to be looking a little bit better. So the international show that's going to take place I think will take precedence, both for us and the rest of Africa. Now that being said, we're looking from a South African perspective and we are hoping that we do well for this particular performance that's coming in 2025. However, if we have a look at maybe let's start with Mozambique. They have challenges that are not going to be very helpful to them in the year to come. The political unrest that's taking place, the current flow of cash in the country, possibly problematic. Perhaps put that into an economic perspective for us of what that means for the year 2025 for Mozambique's currency. That's something that's going to be with us throughout 2025 and into 2026. That's not something that's going to be solved immediately and it will play havoc on the economy. It will play havoc on any investor confidence into Mozambique and the economy will most probably decline and go into recession because of that. But it holds another little threat for us and that's that we use the Maputo border, for instance, for quite a lot of exports. And with the turmoil there, that will also impact on us in South Africa. So it's definitely something that needs to be addressed and I think the Saudi countries need to get involved quite aggressively in trying to solve that and get to solutions there. And to do that, it's not going to be just sufficient to hold talks with the FRELIMO government. It will be worth the Saudi countries and especially South Africa to also have discussions with the opposition side so that you get most probably try and get those people around the table to start discussing the problems and solve the problems. Otherwise it's going to create havoc for quite some time in the Mozambican area and their economy. They are heavily relying on a lot of imports out of South Africa and the flow of that needs to go through borders. So if you don't get your border flow properly, then that economy is really going to battle. You're so right. I mean, the liquidity concerns that could lead to a possible insolvency these are long-term problems that will take much longer to solve through. And again, it then affects our ability to trade and work with them in the long-term problematic. But let's move through to Zambia. Zambia also facing challenges that a little bit out of their control. They've had issues with drought. They've had issues with their copper production or your thoughts on how they're navigating and how that currency stands amidst the southern emerging markets. Yes, a country with a very big agricultural component. And when you have a long-term drought like they've had, it's dramatically bad for the country and their economy. Because not only do they not export anything anymore in terms of agriculture, but they have to start importing. That's got an impact on their reserves. That's got an impact on the flow of money. And then added to that is the production of copper that was declining, which is a big export component for them. So once again, their reserves come under pressure. The whole economy comes under pressure. Now, hopefully the doubt gets solved and that the rain that they've had and more to be expected will solve some of that. Fortunately, the agricultural sector is an interesting sector in the sense that it can recover fairly quickly, especially in terms of maize and wheat. That's a one-year quick solution. You just need the rain and then you have your production back at certain levels. The copper production is a little bit different. That could take a little bit longer. But if you could get the agricultural side right, then that would help a lot for their economy and that could benefit their currency again going forward. Andre, thank you so much. Very interesting perspectives helping us to look at the currencies for those different countries. Thank you so much for your time. That was Andre Selye's Currency Strategist at Treasury One.
Theme: 2025 Currency Market Outlook in Southern Africa
Southern Africa's currency market outlook for 2025 is under scrutiny as the Rand, Zambia's Kwacha, and Mozambique's Metical face significant pressures. The factors driving these currencies include monetary policy shifts, global economic uncertainty, political unrest, and climate challenges. With the return of Donald Trump to the US presidency, there are expectations of a significant impact on the global economy. Andre Cilliers, Currency Strategist at TreasuryONE, provided insights into the current state of these currencies and the challenges they are likely to face in the coming year. In South Africa, the fundamentals seem sound with a focus on fiscal discipline and prudent monetary policy management. The country has made improvements in areas like load shedding and infrastructure development, which are expected to contribute positively to exports. However, political uncertainties in other countries like Germany, France, and Canada, as well as changes in the Chinese economy, could have ripple effects on South Africa and the broader African market. Mozambique is grappling with political unrest and cash flow issues, which are likely to hinder economic growth and investor confidence in 2025. The disruptions at the Maputo border and reliance on imports from South Africa pose additional challenges for the country. Cilliers emphasized the need for regional cooperation and dialogue to address these issues effectively. Meanwhile, Zambia is facing challenges related to drought and declining copper production, impacting its agricultural and export sectors. The country's reserves and currency are under pressure as a result. Cilliers suggested that resolving the agricultural issues could potentially help stabilize the economy and currency, but long-term solutions are needed. Overall, the outlook for Southern African currencies in 2025 is a mix of optimism and caution. While some countries like South Africa show promise with their sound fundamentals, others like Mozambique and Zambia face significant hurdles that require immediate attention and collaborative efforts. The regional dynamics and global economic shifts will play a crucial role in shaping the currency market in the year ahead.
"The liquidity concerns that could lead to a possible insolvency are long-term problems that will take much longer to solve through. And again, it then affects our ability to trade and work with them in the long-term problematic."
['Southern Africa', 'Currency Market', 'Rand', 'Kwacha', 'Metical', 'Donald Trump', '2025 Outlook']