SA's economic slump hurts smaller neighbours
The fortunes of Lesotho, Namibia, and Eswatini are beholden to developments in SA, with their exchange rates pegged to the rand
South Africans aren’t the only ones struggling through the country’s economic slump. The fortunes of Lesotho, Namibia, and Eswatini, formerly known as Swaziland, are beholden to developments in their larger neighbour with their exchange rates pegged to the rand, the worst-performing major currency against the dollar this year. The three nations, together with Botswana, also derive revenue from a customs-sharing pool that gains and falls on South African trade.
The continent’s most-industrialised country is struggling through a recession, but the central bank is hamstrung in cutting its key rate from 6.5% as it strains to contain inflation spurred by higher oil costs and a 13% drop in the rand versus the dollar this year. That’s made it tough for officials in Lesotho, Namibia, and Eswatini to stimulate sluggish activity through looser monetary policy because they have to keep their rates in line to maintain the peg. Botswana, whose currency isn’t tied to the rand, has cut its b...