Following President Jacob Zuma’s decision to remove finance minister Nhlanhla Nene, the rand plummeted to its lowest level in history.
While the latest decline of the rand was fast, it was not out of sync with what has happened since Zuma took office.
Over the last five years, the rand declined from R6.84 against the US Dollar on 13 December 2010 to R15.46 on 11 December 2015.
Zuma’s subsequent appointment of Pravin Gordhan as Finance Minster did little to claw back years of currency weakening.
This steady decline was fueled by both macro-economic factors and structural and policy problems with the South African economy.
The graph below shows the decline of the rand over the last five years.
The impact of the weaker rand on MultiChoice
One of the companies impacted by the weaker rand is MultiChoice, which operates DStv.
MultiChoice purchases most of its international programming in foreign currency – therefore the exchange rate has a big impact on its business.
The rand’s weakness essentially means that the price of international programming increased by around 34% over the last year.
MultiChoice typically increase its DStv subscription fees by a percentage close to CPIX annually, but the weaker rand is putting pressure on the company.
“Whilst we continue to ensure that we minimise the impact on our customers, we are constantly reviewing the situation,” said MultiChoice.