The ZAR Exchange Rate Thread

[MrG]

A bit OT but noticed rand/pound is now on 11.01

10.97 asking google.

 

[Grhardt]

Do you chaps think your currency is strong? When I first visited South Africa (1987) it was something like 2.5Rand for $1. You'll be better off by comparing your 'strong' currency to the Aus $. With the US$ the tables are a bit 'distorted' right now. Can anyone get a comparison table/graph for the last 20years between the ZAR and the rival AUS$ ? That will say more about real strengt/economical development

 

[scotty777]

Well, If the rand gradually increases, and I mean gradually, then everything will begin to balance out... Sure, if the rand suddenly dropped, exporters will make a quick buck, but then petrol and all other goods will increase!

So I think a Strong Rand is an essential rand simply because it will encourage technologies to be bought in here... Also, if you think about it, if SA gov. was clever, they should strengthen the rand more, and then hirer foreign scientists and engineers to work on the Power Crisis business.

 

[Mike Hoxbig]

No DreamKing. If the Rand gets too strong, it could do damage to the economy - take exports for example.

Sorry but consumer benefit outweighs corporate greed.

The weak rand did nothing for vehicle prices, for example. In fact we paid more (and still do) than the countries that they were being exported to. Our salaries didn't increase proportionally either. It did however affect petrol and food prices, making most of the population feel the pinch.

 

[Mike Hoxbig]

Do you chaps think your currency is strong? When I first visited South Africa (1987) it was something like 2.5Rand for $1. You'll be better off by comparing your 'strong' currency to the Aus $. With the US$ the tables are a bit 'distorted' right now. Can anyone get a comparison table/graph for the last 20years between the ZAR and the rival AUS$ ? That will say more about real strengt/economical development

Currency value does not determine the strength of an economy. The Yen is at around 100 to the USD.

 

[scotty777]

We shouldn't have to rely on other countries for anything else but petrol. With a weaker rand it would forrce people to support local manufacturers, who in turn would grow and develop out into the export market. South Africa has the potential to produce so many essential goods for the surrounding developing African countries to comsume, it a shame we're not ambitious enough. There's no reason all these cheap plastics and electronics can be cheaper to bring from China if we had the ran around 10 to the $. This could also encourage overseas companies to set up their facotries here.

There are benefits to a strong rand of course, but you can't have your cake and eat it.

Stronger rand means that the worth or everyones salaries is more giving people more consumer power... Yes, it would result in more people being able to import more goods at cheaper prices in the short term, meaning more money will leave the country (sigh, that's always bad ). buuuttt, if the government played it's cards right, they would be able to attract more and more foreigners to work in our country due to the elevated salary worth... If the government could spark off our software/electronic development in the country (tax breaks, government funded projects, links with China for them to bring in technologies in exchange for resources, etc... ) we will have a far more stable economy and source of income. This will also mean that we will have something more substantial and when (and they will) the resources run out/are too expensive to extract, we will have something for the economy to rely on.

We simply can't compete on a manufacturing front with Asia and now South America because of our bloody heavy workers rights and those pesky things (like that darn constitution), what we need is to move maybe into selling less tangible things like software, electronics, technologies, energy. The first step forward would be stronger rand... Weaker the rand the more reliant we will be on mining, manufacturing and the likes.

 

[Mike Hoxbig]

But we might need to sacrifice cheaper prices in the short term to grow the economy in the long term. If it's cheaper to import something than produce it here, despite all our natural resources, then there is a problem. A weak rand makes it hard for the chinese to compete with local producers. Struggling local textile companies suddenly thrive for example. More jobs, more exports, more buying power. Thousands of other industries suddenly find feasibility to produce locally rather than import. In the longer run we begin to export these goods into Africa as a cheaper alternative. If we're just going to reply on getting all our goods from abroad where do you propose we're going to get the money from to do so ? Churn it in the service sector ? Not plausible.

Weak rand or not, there's no way that we could compete with India and China in some industries. They have the sheer numbers, and people who are willing to work for peanuts. We on the other hand are held to ransom by unions. If our unions did not behave like a bunch of thugs, then there may be hope as the Indian and Chinese economies grow.

There is simply too much greed in this country and we may never realise the benefits of a weaker rand. If that were not the case, then our exports would not cost more here than in the country they're being exported to.

 

[battletoad]

The value of currency is a double edged sword. Strong has positives for joe average but detrimental to investments from overseas. Weak, we all feel the pinch but exports and investments thrive. China is exporting like mad, thus they artificially keeping the yuan weak, and overseas investments flood in.

Wrt to the discussion above, if ever we're to move away from mining to manufacturing of electronics and such with the eye on the Rand at upwards of R8/dollar we have to keep in mind that the educators for these skilled positions might search for greener pastures. Hell even those who mastered a skill may even emigrate. A weak rand leads to brain drain.

Anyone have links to studies on how a strong/weak Rand affects economic growth, or a generalised version for developing nations? Even tho with current happenings those results may be obsolete

 

[BBSA]

<bla bla bla>

Ultimately I think it's already been agreed upon in fiscal policy that we're going to try weaken the Rand anyway. So the debate really is mute.

When did they make such a stupid decision.... which measure are they going to take?

...and if they did it is definitely not working.


EDIT:

http://mybroadband.co.za/vb/content.php/970-Weakening-the-Rand-under-discussion

The government has taken no decision on weakening the rand but the matter is under discussion, President Jacob Zuma said in Pretoria on Thursday.

"We have not taken any decision, but those are matters we are looking at," Zuma said at a press conference held in Pretoria.

"Even economists don't have one view on the matter."

Zuma said that in his discussions with business people, some had argued for the weaker currency and others for a stronger.

"Economists don't easily agree on matters... but it is a matter that is occupying the minds of economists as well as the government."

He said discussions on the currency would form "part of some very special session", where many economic issues would be discussed.

Earlier this week, in its first assessment of the economy, the Organisation for Economic Co-operation and Development (OECD) recommended the lifting of South Africa's remaining foreign exchange controls and that authorities should intervene more actively against strength in the rand.

The OECD said the strong rand has hit exports and recommended that the government provide policy signals on the exchange rate and the direction of interest rates.

It said gains in the rand were hurting the ability to boost exports, while the volatility of the currency was provoking higher inflation.

Exchange rate volatility was a significant driver of inflation with rand depreciation having a bigger effect on prices than rand appreciation.

The OECD did not say what an appropriate level for the rand would be, but said any steps to limit volatility should be done within the policy of keeping inflation inside a 3-6 percent target range.

Finance Minister Pravin Gordhan has remained firm on using the existing policy to let markets determine the value of the rand.

It seems the rooster was wrong as usual

 

[Grhardt]

@Boötes Is it fair to say - economy is not really your strong point In the last page or so you have posted more words then all the other posters combined yet you are saying little. Just out of curiosity, are you a ANC youth league member? Not that is something wrong with them. I like your mentality. Is not bad. Just different Weak rand and hi inflation is what your country need. In another 2 decades you all will be millionaires. Ask Mugabe all about it . . . Peace

 

[Frankie]

I will if pushed however have a dig at your ability to read, because you haven't seem to have gotten that right at all.

LOL @ TheRooster/JohnGuilt/Kill-All-Whitey/................. TROLL

 

[Grhardt]

Yeah. I like Klingon mentality Let me better say sorry and peace. You winn brother.

 

[TMoose]

One thing that people often forget in this type of debate is that new technology is often paid for and imported in USD. A stronger rand makes equipment used for automation and mass production cheaper. It enables companies to import better ways of producing, thus increasing the overall production capacity in the economy and therefore, in the long run, making it cheaper to produce things locally. As producing costs decrease with the introduction of newer and faster ways of manufacturing the initial loss is offset and profit margins rise.

Currently in South Africa most of our companies can't afford modernization. It's too expensive to produce things here so we import them from countries that already have the capacity to produce things cheaply like America, Europe, Australia and China. Yes, of those most of the economies grow more slowly than ours, but that is to be expected as they are first world countries and are industrialised to a much larger extent. China obviously has some way to go, but they are also very different in that they have a very hard working labour force willing to work for next to nothing. We have a bunch of lazy strikers. We shouldn't be looking at China as a sustainable model for SA.

Most of the successful economies have strong currencies, or have nothing to gain from having one because they are already developed and have modern production capacity in place and the technical skills to modernise present. North America, Canada, the UK, the EU, Australasia: these should be our models.

 

[Frankie]

Ever been to Home Affairs lately - you won't see them striking, it's too much effort.

Generalisation is a fact of life and based on personal experiences and lessons learn't - any time I need casual labor I make a point of calling my Zim friend, and he rounds up his Zim mates if we need more hands - they are hard working, understand instruction 1st time, and can work without constant supervision.

 

[Tick]

Do you think it will continue on this trend or will it go back past the R10/$ level soon?
Reason I am asking. I am importing something from the US and if the Rand strengthens another 25-50cents it will save me a considerable amount of money. But if it weakens again it will also cost me bit more.

Personally, my crystal ball says it probably won't strengthen much further, and in the medium term likely to weaken (e.g. one to three years). Consider: One, gold is in a bubble and could pop any day now. Two, we have a mini foreign investment high that is a combination of (a) world cup (b) global investor interest in developing economies as developed economies have been stagnant and they look for returns elsewhere (this will either drop steadily as the developed economies slowly return to positive growth, or pop if there is any major emerging market 'shock', and that will combine with the reality eventually sinking in that the successful world cup did not make SA a solid place to invest), and (c) global investor interest in Africa specifically, probably for the same reasons. Three, within the next couple of years we will start implementing stupid and expensive schemes like the new national health initiative that will continue to destroy the wealth of the country and make everyone poorer. Four, we will see increased talk of mine nationalisation and land grabs ... one of these days the talks will start looking more serious and this will probably coincide with global decreased investment interest in third-world economies. Five, the good returns foreign investors see in 3rd-world countries like SA is often, if you really look at it, due to the high margins they can achieve by bribing or convincing government officials to render their markets uncompetitive, and this is actually harmful to the economies. Six, there will be additional bad news of one sort or the other in SA, be it renewed electricity problems as the economy ticks upwards to the supply ceiling again, more xenophobia, a water crisis, or some other unforeseen nonsense. Six, in two years or so the Dems will likely be voted out in the US and the slightly more business-friendly Republicans will probably be back in power, which should also increase investor confidence in the US again.

But, what do I know. Nobody can predict these things, except when someone is distorting the market purposely.

 

[Palimino]

Our currency is influenced and valued by market forces, the ANC has nothing to do with it

Indirectly they do. They wreck the country and market forces determine that SA is just another loser African nation. This affects the SA environment for international perceptions. Our currency is influenced.

 

[Palimino]

The first step forward would be stronger rand... Weaker the rand the more reliant we will be on mining, manufacturing and the likes.

Good points. I agree. A pity it's dreamstuff and will never happen. The logic is impeccable though.

 

[Palimino]

One thing that people often forget in this type of debate is that new technology is often paid for and imported in USD. A stronger rand makes equipment used for automation and mass production cheaper. It enables companies to import better ways of producing, thus increasing the overall production capacity in the economy and therefore, in the long run, making it cheaper to produce things locally. As producing costs decrease with the introduction of newer and faster ways of manufacturing the initial loss is offset and profit margins rise.

This will not be the trend. We have a massive, unskilled and entitled labour force. Automation and efficiency are not a priority. Labour intensive applications are (employment). We’re phucked!

 

[milomak]

Most of the successful economies have strong currencies, or have nothing to gain from having one because they are already developed and have modern production capacity in place and the technical skills to modernise present. North America, Canada, the UK, the EU, Australasia: these should be our models.

where have you been the last couple of years with the constant whinging from the US about the Chinese not letting their currency strengthen ie, the US wanting a weaker dollar.

 

[scotty777]

This will not be the trend. We have a massive, unskilled and entitled labour force. Automation and efficiency are not a priority. Labour intensive applications are (employment). We’re phucked!

I guess the first true step forward to a thriving economy is education of the masses. If our gov. could slap it's tits together, and organize an education system that works very well in getting at the very least (anything lower and it's another flop) 80% of matric pupils to pass, as well as improving the maths, science and English, then things will begin to grind forward, with oil begin applied to this dilapidated machine.

Of course, that would be a bit of a long shot, but I firmly believe all it takes for a country to thrive is education, education, education (and also having sane, stable politicians helps the cause too . If we can get the country to produce more engineers, scientists and doctors, then I think we should be looking forward.