Picture: REUTERS
Picture: REUTERS

At least, If SA devolves into a dystopian nightmare, and a future president Ace Magashule appoints Nomvula Mokonyane as finance minister, she’ll finally find out just how hard it is to “pick up the rand”.

The currency celebrated its diamond anniversary on Valentine’s Day, after being introduced in 1961 to replace the SA pound. The birth of the rand was a big deal: until then, SA used the UK system, in which you got 12 pennies to a shilling, and 20 shillings to the pound. The decimal system entailed a revolution in thinking.

The apartheid government used a mascot to explain this changeover: a wide-eyed puppet named Decimal Dan, who was introduced in an advertising blitz on Springbok Radio through a catchy ditty describing him as “the rand-cent man, gives you cents for a penny, whenever he can”.

(For a mind-blowing glimpse into 1960s SA, resplendent with glorious moustaches, and patronising stereotypes of the age, watch this YouTube clip, with casual racist lines like how the currency change “is not difficult for the villagers either, especially if they use [their] fingers”.)

Remarkably — and this is a fact that will rattle young South Africans — from 1961 to 1982, the rand was stronger than the dollar. Initially, R1 would buy you $1.40; today, it’ll get you $0.07. In the UK in 1961, R1 would buy you 50p; today, it’ll buy you 5p.

Mokonyane, a favourite daughter of the “radical economic transformation” faction of the ANC of which Magashule is the de facto don, was right that the rand fell during the apartheid era. But she was entirely wrong to imply that it’d be easy to “pick it up” again, as she did when she defended former president Jacob Zuma’s currency-battering cabinet reshuffle in 2017.

At the time, Pravin Gordhan pointed out that when the rand falls, “there are huge consequences for your pension benefits, for your pension funds, for the prices that we have to pay in SA, for the price that we’ll have to import oil into SA to make diesel and petrol”.

There’s no kidding that the rand’s trajectory since 1961 has made life a whole heap more expensive.

This week, Stats SA put out a note detailing how, when the currency was launched in 1961, R100 would buy you a basket of groceries, which would cost R9,700 today.

The groceries that kept their value the best: a loaf of bread which cost 9c then but R15.21 today; and a single 570ml beer, which cost 16c then but R14.56 today for a smaller 330ml can.

On the other side of the spectrum, some groceries have gone through the roof. For example, you could buy a one-pound packet of ground coffee for 87c in 1961, but today it’ll set you back R147.38; fresh chicken cost 70c per kilogram then and R58.09 today.

It shows the impact of inflation — which has risen by about 8% per year since 1961, and reached a peak of 19.7% in 1986, after PW Botha’s Rubicon speech (which was his own “we’ll pick up the rand” moment). 

Actually, one of the reasons the rand has weakened so much over the past few decades is because our inflation rate is so much higher than that of our main trading partners — if it hadn’t weakened, nobody would have wanted to buy our exports.

Stats SA, in what must rank as perhaps its most adventurous foray yet into casual humour, said: “To all those newly minted couples celebrating Valentine’s Day, may your love have the longevity of the rand — just keep it stronger.”

Weather for emerging markets

But if the rand has fallen a lot since 1961, it has also become a favourite currency for financial traders, since it’s seen as the most easily traded emerging-market currency. If you want to take a punt on any rise, or fall, in emerging markets, trading the rand has become a go-to option.

As Colleen Goko writes for Bloomberg, the rand is now the “weather vane of emerging-market confidence”.

At last count, she writes, the rand was the 18th-most-traded currency in the world, with daily turnover in the currency now $72bn. And, perhaps more illuminating, demand for the rand rose 180% between 2010 and 2019.

The rise of the rand in the post-apartheid era has to do with the speculative frenzy in the emerging-markets sector driven by financial sectors in New York, London, Zurich, and Singapore,” said Liam Hunt, an analyst at GoldIRAGuide.com in New York.

As Hunt told Bloomberg, as one of the only African powers without a history of coups, SA is “uniquely positioned as a relative beacon of financial stability”.

It’s also due to the fact that the Reserve Bank has an impeccable reputation for stability globally.

But were we ever to witness the nightmare of a Magashule presidency — which, as Richard Poplak argues in the Daily Maverick, is entirely possible — you wouldn’t bet on the Bank’s integrity remaining so solid.

In June 2019, Magashule told journalists that the ANC was resolved to “expand” the Bank’s mandate, exploring “quantity easing measures … to make funds available for developmental purposes”.

Magashule, of course, meant “quantitative easing”, but the faux pas is perhaps a reflection of the “quality easing” that has been evident in the ANC’s top leadership. But the point was, Magashule reckoned the government could simply shake down the Bank for more money, to fill the hole created by a decade of mismanagement of the economy.

At the time though, finance minister Tito Mboweni immediately scotched Magashule’s argument. “There is no quantitative easing thing here. The primary mandate of the [Bank] is to protect the value of the currency in the interest of balanced economic growth and development,” he said.

As it should be. But were Magashule’s faction to ever get their way, Mokonyane would have a whole lot more work to do to  lift the rand out of the giant hole it would surely plunge into.

*Rose is editor of the FM

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