Why is it bad if the R is too strong?

[scotty777]

Well, what you want in an economy is for money to come into the country, and say in the country...

If the rand strengths, then you will have more people buying goods from other countries because it's cheaper. This means that more money is leaving the country, which can stuff up the economy anyway.

Personally, all adverse effects will balance out over time.

However, if we all look at the top economies in the world, they sell manufactored goods, while South Africa sells raw materials. A rough diamond is worthless in the world, but a well cut diamond is worth tons. Just like gold. The moral here is that South Africa will never be a rich country unless we start to fill the manufacturing sector, and start offering products to the rest of the world that are of extreme value.

[killadoob]

Originally Posted by risingtide

If it benefits the man in the street, which is everyone, then it is implicit that it benefits the economy.

Maybe you don't mean the man in the street but the people who have jobs, or the people who work (which isn't the same thing), or company management, or government, or whatever?

Well a strong rand means we are weak in the export industry and uncompetitive which means job losses less exports. As far as i know we need to export more than import to maintain our economy.

[Garyvdh]

Originally Posted by killadoob

I dunno about that, don't we export gold and what not so surely a strong rand will be bad for that sector.

What about farming, we must export tons of farming related items so a strong rand once again would not good be good for us.

In my opinion a strong rand is not good for this country. Maybe a strong rand benefits the man on the street but does it benefit the economy?

um, that's why I said there are "pros AND cons".

You do know what those are don't you? "pros and cons"

Do you want to go and google it?

[risingtide]

The only way to improve people's lives is to improve the efficiency of the productive sector while at the same time increasing quality and local content of the goods.
Impoverishing people by advocating a weak rand is just stupid although it may have short-term benefits.
A continual slow appreciation of our money, coupled with greater productivity, better education, improved health, and more opportunities (livelyhoods, not necessarily jobs) for the people should be the aim of the government and the private sector. The only justification for a weaker rand is if it would kickstart one of these long-term goals.

Nowadays investment creates a few jobs at a cost of R100k to R1M or more per job. There is no way that foreign investment can make any major difference in the number of available work places.

[killadoob]

Originally Posted by Garyvdh

we deal mainly in imports, so the stronger rand benefits us and we are able to pass savings on to our customers who are able to manufacture their goods cheaper and sell them to South Africans at more affordable rates.

So there are pros and cons to a Strong Rand.

Maybe when you say pro's and cons you should be able to speak for yourself and have some idea apart from google, instead of coming later in the thread and going on about your pro's and cons which you still have not said what you think they are, so go google and come back and tell us .

Seriously speak up a little more, google is only your friend if you are not clued up on stuff and not knowing we need to export more than import leads me to think you need to google more bud.

So gary what are the pro's and cons as you mentioned? come on now at least try without googling.

[BrandonH]

If the rand is strong it means we will import more and export less. Local manufacturers will lose out to cheaper imports thus resulting in job losses resulting in more people claiming unemployment benefits from the state.

So basically SA would constantly be sending more money out of the country than is coming in. Obviously this is unsustainable.

Now 1st world countries like the UK have massive banking sectors which bring in money from overseas without any physical manufactured product having to be exported. (so a strong currency doesn't matter). So even if they import more manufactured goods than they export they still end up with more money coming in due to industries like banking. This is why some countries are tax havens to attract big companies to incorporate there and so pay tax there.

I don't think SA can benefit like this and so we have to rely on exports of manufactured goods and minerals like gold/platinum etc. And thats why a weaker rand is better for SA, IMO.

[murraybiscuit]

you want a stronger currency in the long run. developed nations have strong currencies, third world countries have weak ones.

unfortunately, to get there, you have to go through the growing pains of being a developing nation. while you have a weaker currency, you should take DIRECT foreign investment and forex from imports, and reinvest them in skills development, infrastructure and a diversifiying your economy.

unfortuantely, if you have very unskilled labour that frequently goes on strike and demands globally uncompetitive salaries, you'll only ever sell resources at the bottom of the food chain. which will benefit the owners of the resources, but not the population as a whole.

does that summarise it?

[risingtide]

Since I got to this country, the money I brought in is now approx. 1/30th worth of what it was then. Overseas investors would have experienced the same thing.
They want a return on their investment, if the rand depreciates they will include that in their costing structures up front.
One reason why we get ripped off in this country.

[boramk]

Originally Posted by Drunkard #1

/rant

A strong Rand is GOOD for SA. SA is not an exporting country, it's an importing country. If it was an exporting country its balance of trade would be positive, and it isn't.

blah blah
/end rant

Damn, you are right! With a trade deficit of 7.3% of the GDP, a strong Rand will defiantly help us!

Originally Posted by Hellbilly Deluxe

just how do countries like the uk and germany export with their currency at such high levels , hell germany is the 3rd largest economy in the world ???

R1 does not equal $1, it does not have the same purchasing power.
The same way R1 does not equal One Yen ...