What would happen if the Western Cape dropped the rand and used its own currency

A study conducted by IG Group in collaboration with the London School of Economics has considered the potential implications of the Western Cape dropping the South African rand.

If the Western Cape were to create its own currency – called the Cape Rand – and break away from South Africa’s national currency, it would be able to improve existing economic advantages, according to the study.

These advantages include the province’s relatively advanced economic progression, lack of dependence on mineral resources, and political development.

The GDP per capita in the Western Cape is second only to Gauteng, and is almost double that of the country’s poorer provinces.

According to the study, breaking away from South Africa’s currency and creating its own could allow the region to position itself as a base for higher value-added manufacturing.

“Depreciation of the new currency could allow the province to protect new industries while they gain a foothold in global markets.”

If this were to happen, the study said that it would have major ramifications for the political and economic situation in South Africa.

“A declaration of monetary sovereignty by the Western Cape would almost certainly lead to conflict with the other provinces in South Africa,” the study stated.

“Since the South African rand is not a strong currency – it has halved in value against the dollar since 2010 – the gains from an independent currency would likely be very small for the Western Cape,” the study added.

Change in rand value since 2001

Rand value

GDP per capita of SA provinces

GDP per capita provinces

Now read: How much of your tax money South Africa’s pathetic state-run enterprises are getting

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What would happen if the Western Cape dropped the rand and used its own currency