Godongwana says stable political environment favours rand exchange rate

South Africa’s Finance Minister Enoch Godungwana said the rapid formation of a new coalition government after the country’s May election boosted investor confidence and drove gains in the country’s currency and stock market.

“The market was looking for stability and the formation of a government of national unity in a very short period of time brought that stability,” Godungwana said in an interview on the sidelines of the New Development Bank’s annual general meeting in Cape Town.

“This means that the rand and South African stocks have benefited from the political stability that has been established in a very short period of time.”

The May 29 vote was the first time the ANC lost its parliamentary majority since it took power in the country’s first multiracial elections in 1994. The party formed a coalition with nine other major pro-business parties within a month to retain power, agreeing that developing the economy would be the new government’s top priority.

Since President Cyril Ramaphosa announced his new cabinet on June 29, the rand has risen 3.7% against the dollar, the biggest gain among African currencies, while the FTSE/JSE All-Share Index has risen 6.6% over the same period.

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According to Godongwana, despite calls within the BRICS countries to introduce a common digital currency, officials at the meeting have not yet made any decision on whether it should be introduced. The BRICS Development Bank was established in 2015 by the BRICS developing market countries.

“Russians are very enthusiastic about digital currencies, but they also recognize that a transition is needed. All central banks are discussing digital currencies and how to regulate them,” he told reporters. “Discussions are ongoing about a common payment system. It’s a complex issue.”

The term “BRIC” was coined in 2001 by Jim O’Neill, then an economist at Goldman Sachs, to draw attention to the strong economic growth of Brazil, Russia, India and China. The leaders of the four countries met collectively for the first time in 2009, and South Africa was invited to join the group the following year.

On January 1, Iran, the United Arab Emirates, Ethiopia, and Egypt became members. Saudi Arabia was also announced as a new member, although Saudi Arabia later said it was still studying the invitation to join.