![\"Rand](\"http:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2016\/03\/Rand-before-and-after-Nene.png\")
<\/p>\nDecember 2015 is a month that will be remembered for President Zuma\u2019s ill-considered decision to dismiss Nhlanhla Nene as minister of finance.<\/p>\n
A new report published by Gerhard van Onselen, economic researcher: Solidarity Research Institute (SRI), shows how the decision caused substantial upset for the rand on the international currency markets.<\/p>\n
The fallout from this event was severe, and once again placed the weakness of the rand at the forefront of public discourse, the report said.<\/p>\n
The weaker\u00a0 rand also complicated the context in which finance minister Pravin Gordhan had to present his February 2016 budget speech.<\/p>\n
The rand regained some of the value it had lost after Nene\u2019s dismissal, only to become volatile following the minister’s speech.<\/p>\n
<\/p>\n
Even before Nene\u2019s dismissal and late February\u2019s budget volatility, however,\u00a0van Onselen noted that the rand had been steadily depreciating against the dollar.<\/p>\n
“The post-Nene exchange rate volatility is not the entire story,” the researcher said.<\/p>\n
A mere five years ago in April of 2011 the rand traded at around R6.60 to the US dollar. Since then, highs of around R16.80 have occurred, Solidarity said.<\/p>\n
![\"Rand](\"http:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2016\/03\/Rand-Dollar-exchange.png\")
<\/p>\n
Solidarity highlighted several salient points in the report:<\/p>\n
\u201cIn the long run a currency reflects the fundamental economic factors of the government that issues it. Those fundamental factors are mainly local factors and not external ones. Government determines the local policy environment that can stifle or stimulate economic growth,\u201d Van Onselen said.<\/span><\/p>\n He said that without a significant deviation from damaging policies and laws, the rand will continue to underperform.<\/p>\n What does this mean for you?<\/strong><\/p>\n For the man on the street a weakening currency holds negative consequences, the report warned.<\/p>\n These include more expensive imports, faster-rising domestic prices, likely interest rate\u00a0 hikes,\u00a0 cost-pressures on businesses, retrenchments, and general insecurity in the labour\u00a0 market.<\/p>\n The current round of rand weakness is therefore harmful to most people in SA, Van Onselen said.<\/span><\/p>\n “Though there are always external shocks, policies adverse to economic growth are playing the largest part in the weak domestic economy. These are internal factors and they can be reversed by government.<\/p>\n “Economies are highly resilient and can recover quickly, returning to much needed robust growth. What is required is a reversal of harmful policies and laws and much less state interference in the\u00a0 economy.<\/p>\n “Unfortunately, unambiguous mentions of such freedom – driven reforms were largely absent in the February 2016 national budget speech,” the report said.<\/p>\n A full copy of the report can be found here<\/a><\/p>\n South African politics vs the rand<\/a><\/strong><\/p>\n Rand tumbles as Hawks threaten legal action against SA finance minister<\/strong><\/a><\/p>\n![\"Rand](\"http:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2016\/03\/Rand-depreciation-trends.png\")
<\/p>\nMore on the rand<\/h3>\n