Zuma magic – from R12.33 to R13.92 in a week

On Monday, ratings agency S&P Global downgraded South Africa’s sovereign credit rating to junk status – which resulted in the rand weakening against major currencies.

The downgrade was a direct result of President Jacob Zuma’s cabinet reshuffle, which included firing finance minister Pravin Gordhan and his deputy Mcebisi Jonas.

“In our opinion, the executive changes initiated by President Zuma have put at risk fiscal and growth outcomes,” said S&P Global.

S&P Global said it has a negative outlook, which reflects the political risks and potential policy shifts which could undermine economic growth in the country.

These political risks and poor economic outlook have resulted in the rand weakening from R12.33 against the US dollar on 27 March to R13.92 on 4 April.

The graphic below shows how the rand has weakened against the dollar.

USD to ZAR (Mar-Apr)

Bad news for tech consumers

The weaker rand is bad news for consumers, who can expect to pay more for imported products.

It is particularly bad news for buyers of computing equipment, who will be hit by a triple whammy.

Apart from the weaker rand, external factors are putting pressure on the price of SSDs, DRAM, and LCD panels.

SSDs, flash memory, and DRAM have seen a price increase of 30% over the last three months due to shortages.

Pricing pressure on televisions and laptops which use LCD panels is also taking place, due to panel pricing increasing substantially thanks to an international shortage in the market.

This combination of factors will see the price of many tech products increase significantly over the coming months.

Now read: Expect to pay much more for SSDs, memory, and laptops in South Africa

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Zuma magic – from R12.33 to R13.92 in a week