News that South Africa’s government agreed to provide another 60bn rand (US$4.2bn) bailout to Eskom between now and 2021 caused the rand to weaken by 2.3% against the US dollar due to fears that this will result in the sovereign losing its last investment-grade credit rating. More broadly, figures suggested that South Africa’s economy returned to growth in Q2, but remained very weak. We think that weak growth and slowing inflation will prompt the South African Reserve Bank to cut its key policy rate in September.
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