EDITORIAL: Bad news not helping rand’s case

It is just as well for SA that US inflation numbers came in slightly better than expected late on Wednesday. Had they been worse, the rout in the rand could have been even more savage than it was already. And we have only ourselves to blame.

The rand hit R18.83/$ on Wednesday, its worst level since the depths of the Covid financial market turmoil in March 2020. It has been the worst performing emerging market currency, depreciating by almost 7% against the dollar for the year to date and almost 18% over the past 12 months, as Reserve Bank governor Lesetja Kganyago pointed out in a speech. The rand’s weakness has made his task of combating inflation that much harder, putting pressure on him to keep raising interest rates even as the economy hits zero growth.

Technically, the rand is undervalued on key metrics. In practice, investors aren’t remotely persuaded by that because the news out of SA is so bad. That Eskom is now implementing stage 6 load-shedding for the foreseeable future is a huge signal to investors that the power crisis strangling the economy is not going away any time soon. Add greylisting and a deteriorating fiscal outlook and the rand may well stay under pressure. Those overseas holiday plans may have to wait.