The ZAR Exchange Rate Thread

[Sinbad]

We're a net importer of capital goods. How on earth does a weak rand help us in the long game?

My dad's company, for example, uses imported German machinery. Everything has to be imported, including the spares and even the engineers as the local pool has dried up. What happens when companies such as his need to start replacing or repairing equipment and they can only buy rands with toilet paper

Because people think that our raw material exports are ideal to sustain and grow our economy. The fact that they require constant weakening of the currency to make their case kinda proves them wrong...

 

[JStrike]

The Noble prize were given to many idiots before notably some South Africans so that REALLY means nothing to me but it means a lot to/for many idiots.

Then your poor economic ramblings maked a lot of sense....only in your mind. As I said do not be disturbed and carry on with your dream world.

Good reasoned argument there

 

[JStrike]

We're a net importer of capital goods. How on earth does a weak rand help us in the long game?

My dad's company, for example, uses imported German machinery. Everything has to be imported, including the spares and even the engineers as the local pool has dried up. What happens when companies such as his need to start replacing or repairing equipment and they can only buy rands with toilet paper

It forces import substitution. Which, while it might hurt some companies in the short term, that hurt is needed for the economy as a whole in the long term

 

[Thor]

It forces import substitution. Which, while it might hurt some companies in the short term, that hurt is needed for the economy as a whole in the long term

Makes fokhol sense

 

[JStrike]

Makes fokhol sense

You should read up on the subject matter. It is really, really interesting

 

[thestaggy]

It is a generally accepted principle that if your economy is export driven that a depreciated exchange rate will be of benefit- China, Japan, Asian tigers are all examples of this.

However if there are systemic issues in an economy(infrastructure, labour etc) such that supply cannot respond appropriately to a depreciated exchange rate, then the economy will be in for some pain.

Don't you also need to factor in what you export? Japan export a large amount of final products or capital goods and very, very little in the way of raw materials. We rely on exporting raw materials that we then have to buy back as finished goods, and it is here that a weak rand hurts us. Japan would be buying the raw materials on the cheap from us then selling us capital goods/finished goods.

 

[Thor]

Don't you also need to factor in what you export? Japan export a large amount of final products or capital goods and very, very little in the way of raw materials. We rely on exporting raw materials that we then have to buy back as finished goods, and it is here that a weak rand hurts us. Japan would be buying the raw materials on the cheap from us then selling us capital goods/finished goods.

My point exactly

 

[sox63]

I meed currency and each 50c drops makes a big difference

Buy before the 17th of March then. That's when the Fed will meet and a clearer picture will emerge. Right now speculation is driving emerging market currencies down and if say the Fed does not make a clear signal of rates increase by June, all that money will flow right back I think

 

[Swa]

On the one hand we have a well reasoned argument by economists (One of which is a Nobel prize winner in Economics).
On the other hand we have your ramblings

Nope, on the other hand we have economists highlighting the negative aspects of a weak rand like increased inflation which the RB will curb by increasing the repo rate. Good for investors like me but not good for people with debt. Not good for competitiveness then but keep dreaming.

Good reasoned argument there

It forces import substitution. Which, while it might hurt some companies in the short term, that hurt is needed for the economy as a whole in the long term

Yeah good reasoned argument there. Force inferior local goods by making good quality imported goods prohibitively expensive.

 

[Nomad]

i have 2 companies.
in both companies the major client is us based.
all billing is us based & paid into us based bank account.
money (us$) is "brought in" to meet local operational costs
my staff salaries are zar based, however in situations like this the benefit is passed directly on to them as well.


personally, i would keep the funds out of the country in a $ based account and use as needed, or when sudden exchange rate fluctuation like this occur

Thanks for the reply and info.

 

[saturnz]

Don't you also need to factor in what you export? Japan export a large amount of final products or capital goods and very, very little in the way of raw materials. We rely on exporting raw materials that we then have to buy back as finished goods, and it is here that a weak rand hurts us. Japan would be buying the raw materials on the cheap from us then selling us capital goods/finished goods.

you can factor many things into it, but the principle remains the same

 

[Musiclover08]

At the current rate our money is going, it is wise to move some cash out the country into foreign income offshore

 

[Swa]

At the current rate our money is going, it is wise to move some cash out the country into foreign income offshore

It seems for anybody that's going to buy a lot of goods off shore shortly it may be a good idea to convert into USD now.

 

[JStrike]

Nope, on the other hand we have economists highlighting the negative aspects of a weak rand like increased inflation which the RB will curb by increasing the repo rate. Good for investors like me but not good for people with debt. Not good for competitiveness then but keep dreaming.



Yeah good reasoned argument there. Force inferior local goods by making good quality imported goods prohibitively expensive.

Inflation would indeed be a problem in the short term. Volatility however is the bigger problem.

And yes, that is exactly what import substitution is mean to achieve. Inferior local goods aren't a bad thing, you have to start somewhere. Many successful exporters of decent quality goods, were once upon a time producing inferior goods

 

[Thor]

Inflation would indeed be a problem in the short term. Volatility however is the bigger problem.

And yes, that is exactly what import substitution is mean to achieve. Inferior local goods aren't a bad thing, you have to start somewhere. Many successful exporters of decent quality goods, were once upon a time producing inferior goods

Source ?

 

[JStrike]

Source ?

For inferior goods to decent quality?
The most famous is Hong Kong, and most recently China.
However you can include: Japan, Singapore and Mexico. Indonesia and Vietnam are rapidly improving in quality as well. USA also used to be low quality manufacturing in certain sectors once upon a time.

And interestingly enough, South Africa's high tech manufacturing (and exports thereof) are of fairly decent quality. Just not really cost competitive

 

[Grant]

It seems for anybody that's going to buy a lot of goods off shore shortly it may be a good idea to convert into USD now.

interesting timing, just came back & saw your post now.
i brought in us$ at about mid day yesterday.

was in two minds as to wait a little longer, but decided the time was good & not to get greedy - seems it was a good decision looking at today's rate

 

[Thor]

For inferior goods to decent quality?
The most famous is Hong Kong, and most recently China.
However you can include: Japan, Singapore and Mexico. Indonesia and Vietnam are rapidly improving in quality as well. USA also used to be low quality manufacturing in certain sectors once upon a time.

And interestingly enough, South Africa's high tech manufacturing (and exports thereof) are of fairly decent quality. Just not really cost competitive

Source to specific companies. Since what you mentioned is still generally inferior

 

[JStrike]

Source to specific companies. Since what you mentioned is still generally inferior

Are you trying to imply the only time we would want to start import substitution is if are able to produce the best quality? Are you being serious? Surely you realise that would doom our economy to be a minor player forever

 

[maumau]

an economist on 702 claims those in the know are not dumping SA investments, therefore he believes the rand has a chance of strengthening.

he says if it was on the road to nowhere the market would be flooded with investors pulling out.