South African Rand Falls After Trump Funding Cut-off Threat

Following US President Donald Trump’s announcement that he would stop providing funds to South Africa, the country’s stocks, government bonds and rand all declined on Monday. In South Africa, Trump said Sunday that “certain classes of people” were being treated “very badly” and that he would halt funding until the issue was looked at but he did not provide any supporting evidence.

Ten days after President Cyril Ramaphosa approved legislation allowing the state to expropriate land in the public interest under specific conditions which made Trump claim that South Africa was engaging in land confiscation.

The rand was down 1.2% from its Friday closing price of 18.94 against the US dollar at 10:35 GMT. It had dropped over 2% earlier in the day. The benchmark 2030 government bond fell as the yield increased 15.5 basis points to 9.21% while the Top 40 index on the Johannesburg Stock Exchange closed down around 1%.

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Ramaphosa promised to speak with Trump while South Africa’s foreign ministry responded to Trump on Monday by stating that its expropriation act was not special.  Racial imbalances in land ownership are intended to be addressed by South Africa’s expropriation law which requires certain requirements to be fulfilled before land can be taken.