EDITORIAL: Please listen to what our underperforming rand is telling us
SA’s fundamentals have deteriorated quite rapidly and our growth performance has been trashed by our longest stretch of load-shedding
14 February 2023 - 05:00
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
It wasn’t that long ago that The Economist magazine’s lighthearted Big Mac index had the rand on its list as one of the world’s more undervalued currencies, suggesting it could only go up. It wasn’t that long ago either — two months ago to be precise — that the rand was trading at R16.30 to the dollar.
Yet this week the rapidly sliding rand hit R18 to the dollar and SA now finds itself in the embarrassing position of having the second-worst performing emerging market currency, second only to Argentina’s peso, which is down about 7% for the year to date to the rand’s more than 5%. Over the past year the rand is down 14%. And much as we may think we look quite decent in an emerging-market universe that includes the likes of Turkey and Russia, the fact is that SA’s fundamentals deteriorated quite rapidly.
Our growth performance has been trashed by the longest yet stretch of load-shedding, as well as by the constraints of logistics (for which read Transnet) and other state dysfunction. Measures to address the electricity crisis are not being implemented nearly fast enough to make much difference this year or even next year, which is why economists, including those at the central bank, have revised growth forecasts down to well below 1%.
Commodity prices are off their peaks and the current account of the balance of payments has shifted from surplus to deficit, putting pressure on the rand. Foreign capital flows have been more negative than positive. And SA faces the likelihood of being greylisted by the Financial Action Task Force later this month, despite laudable, if last-minute efforts to avoid this.
Deteriorating fundamentals in a global environment that is “risk off” because of still-rising US interest rates is not a good place for an emerging market to be. But while SA can do little about the global drivers that caused the rand to slide, it is within its power to do something about the local ones — and do it urgently. Our underperforming currency is telling us something. Time to listen.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
EDITORIAL: Please listen to what our underperforming rand is telling us
SA’s fundamentals have deteriorated quite rapidly and our growth performance has been trashed by our longest stretch of load-shedding
It wasn’t that long ago that The Economist magazine’s lighthearted Big Mac index had the rand on its list as one of the world’s more undervalued currencies, suggesting it could only go up. It wasn’t that long ago either — two months ago to be precise — that the rand was trading at R16.30 to the dollar.
Yet this week the rapidly sliding rand hit R18 to the dollar and SA now finds itself in the embarrassing position of having the second-worst performing emerging market currency, second only to Argentina’s peso, which is down about 7% for the year to date to the rand’s more than 5%. Over the past year the rand is down 14%. And much as we may think we look quite decent in an emerging-market universe that includes the likes of Turkey and Russia, the fact is that SA’s fundamentals deteriorated quite rapidly.
Our growth performance has been trashed by the longest yet stretch of load-shedding, as well as by the constraints of logistics (for which read Transnet) and other state dysfunction. Measures to address the electricity crisis are not being implemented nearly fast enough to make much difference this year or even next year, which is why economists, including those at the central bank, have revised growth forecasts down to well below 1%.
Commodity prices are off their peaks and the current account of the balance of payments has shifted from surplus to deficit, putting pressure on the rand. Foreign capital flows have been more negative than positive. And SA faces the likelihood of being greylisted by the Financial Action Task Force later this month, despite laudable, if last-minute efforts to avoid this.
Deteriorating fundamentals in a global environment that is “risk off” because of still-rising US interest rates is not a good place for an emerging market to be. But while SA can do little about the global drivers that caused the rand to slide, it is within its power to do something about the local ones — and do it urgently. Our underperforming currency is telling us something. Time to listen.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Related Articles
EDITORIAL: Who would be Eskom’s new boss?
EDITORIAL: Don’t blur state and party lines
EDITORIAL: Thungela’s Australia coal deal a high-stakes gamble
EDITORIAL: Protect poor from load-shedding tax
EDITORIAL: SA is uninvestable right now, but that can change
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.