The rand’s nose-dive over the past decade

 ·19 May 2023

The rand has been in free-fall over the past 10 years, and the past week’s news events have only reminded South Africa of the rand’s vulnerability to international and local instability.

The rand hit a new all-time low against the dollar last week – surpassing R19 to the US dollar – following allegations that South Africa supplied weapons to Russia.

Additionally, the rand has been taking a beating due to ongoing and heightened load shedding, the country’s greylist status, and uncertainty about economic and political policy.

Everest Wealth, a private investment and wealth management company, outlined some factors putting pressure on the rand and showed the rand’s depressing performance over the past decade.

“The rand’s value against other major currencies has attracted considerable attention recently, highlighting its volatility and vulnerability to the market, and there are several factors that affect the rand’s exchange rate,” it said.

For one, “political and economic uncertainty has significantly influenced the rand in the past 10 years and resulted in the currency seeing a real seesaw.

“These events have led to a lack of foreign investment, which in turn results in the rand seesawing,” said the head of product development at Everest Wealth, Thys van Zyl.

He added that the rand is known for reacting to international events, and developments in the American financial market have already had a major influence on the currency this year.

The country’s trade balance also affects the rand’s exchange rate. A significant trade deficit can also put pressure on a country’s currency. If a country imports more goods and services than it exports, there is a greater demand for foreign currencies which leads to the depreciation of the domestic currency.

“In the past ten years, South Africa has experienced several trade deficits, which has ultimately affected the rand,” said Van Zyl.

Additionally, the National Treasury has provided more bad news for the country’s economy, expecting South Africa to fall short of its primary surplus budget goal for the fiscal year ending in February 2023.

South Africa is a major exporter of commodities such as gold, platinum and coal, and the rand’s value is also affected by the change in international commodity prices.

“If commodity prices fall, this could negatively affect South Africa’s export earnings, trade balance and the overall value of the rand.”

This is a crucial factor affecting the rand right now, as the Bureau for Economic Research (BER) noted a decrease in critical South African export commodities, adding that there is little prospect of them turning around any time soon.

Announcements by central banks and monetary policy decisions have also compounded the rand’s decline.

If a central bank follows a policy that increases the money supply or lowers the interest rate, it can cause the currency to weaken. These factors affected the rand’s value relative to other currencies, especially during the Covid-19 pandemic.

As a result of several of these factors, the rand has weakened significantly since 2013.

As of 15 May 2013, the rand stood at R9.26/$, R11.94.00/€, and R14.10/£. As of 15 May 2023, the rand had weakened by 105% against the dollar, 73% against the euro, and 69% against the pound.

This is how the rand has performed against some of the world’s largest currencies over the past 10 years:


Read: ‘Difficult trade-offs’ coming to keep South Africa afloat

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