- The rand was 0.15% weaker at 19.0320 per dollar compared to the day's high of 18.7200.
JOHANNESBURG: South Africa's rand edged weaker on Wednesday as optimism over the 500 billion rand ($26.41 billion) rescue package announced by President Cyril Ramaphosa on Tuesday gave way to concerns about economic growth.
At 1550 GMT the rand was 0.15% weaker at 19.0320 per dollar compared to the day's high of 18.7200. Lingering risk-aversion combined with concerns about how the stimulus package would be funded spurred fresh selling in New York.
Ramaphosa said South Africa had approached global financial institutions like the World Bank and International Monetary Fund, the BRICS New Development Bank and the African Development Bank, primarily to fund healthcare interventions.
But traders are anxious to see whether South Africa will issue more debt into a crowded market and how the government plans to plug the large fiscal deficit in the future.
“The president's announcements last night also stated the need for structural reforms and inclusive economic growth. However, South Africa is expected to have been in a three-quarter recession before April this year," Investec's chief economist Annabel Bishop said.
“The widening of government debt projections substantially further would increase the likelihood of additional credit rating downgrades, making SA's growth objectives more difficult to achieve."
South Africa imposed a five-week nationwide lockdown to the end of April and has the most confirmed coronavirus cases in sub-Saharan Africa, at 3,465, with 58 deaths.
The lockdown is set to drag the economy into a 6.1% contraction, according to the central bank.
Stocks rose, benefiting from a jump in the prices of oil and gold and Ramaphosa's stimulus package, which will also increase welfare provision to help poor households suffering because of the nationwide lockdown.
Economists anticipate that the extra money will help drive demand, and in turn support retailers.
“Together these measures will ensure that there is at least some, albeit a very modest, level of underlying demand in the economy," Nedbank senior economist Nicky Weimar said in a note.
“Food, beverages and pharmaceutical retailers and producers will be the main beneficiaries of these specific support measures."
The general retail index rose 0.66%, while the food and drug retailers index rose 0.49%.
Gold stocks benefited from an increase in bullion prices, with the index up 8.66%, while petrochemical firm Sasol rebounded along oil prices, up 6.94%.
The Johannesburg Stock Exchange's Top-40 index firmed 1.17% to close at 44,248 points, while the All-Share index rose 1.01% to 48,108 points.
Bonds weakened, the yield on the 10-year government bond due in 2030 up 10 basis points to 10.770%.