Who is toying with the rand?

Author:Commey, Push
Position:South Africa - Brief Article

The mystery surrounding the dramatic decline in recent weeks of the South African currency, the rand, finally unravelled on 4 January when the chairman of the South African Chamber of Commerce, Kevin Wakeford, called for a commission of enquiry into the matter.

"Certain individuals and institutions," Wakeford charged, "have colluded under false pretences to enrich themselves using dubious financial methods and instruments and thus precipitated the rand's free fall".

Untill his dramatic bombshall, nobody seemed to be able to put a finger on why the rand was deprediating at such a rapid rate, and why it remained one of the most indevalued currencies in the world, despite the fact that, globally, South Africa has one of the best-performing economies.

The reasons given by market analysts, economists and "experts" had ranged from the possible to the bizarre, and sometimes plain comical. The Zimbabwe "crisis" was one of them. President Mbeki's views on Aids was another. Even the political crisis in Argentina (where they recently went through five presidents in two weeks) was cited. After Christmas, the portfolio of reasons increased to include the political unrest in Zambia, the retirement of the South African Reserve Bank deputy governor James Cross, and the Mbeki government's decision to appeal against a court ruling compelling it to provide Nevirapine to HIV-positive pregnant women.

Exporters who had delayed the repatriation of foreign currency were also blamed, as well as the slow pace of privatisation in the country.

Another reason, it was said, was a rumour about plans by a major South African company to spend hundreds of millions of rand in Europe.

Blame was also heaped on big South African companies who have de-listed from the Johannesburg Stock Exchange and taken their business abroad in recent years. They were taking too much money out of the country, it was said. Not spared either were international currency speculators who got a thrashing in the media.

Bolder analysts, however, went further and pointed to racism (now euphemistically known in these parts as "Afro-pessimism"), and a consequent lack of confidence by investors in a black-run country as the cause of the rand's decline.

Going down

Once a powerful currency, the rand has been in decline since January last year when it was worth 7.58 to the US dollar. By September, it had weakened to 8.46, and slumped further to 13.10 (20.02 to the pound sterling) by Christmas.


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