{"id":494475,"date":"2023-06-03T10:59:03","date_gmt":"2023-06-03T08:59:03","guid":{"rendered":"https:\/\/mybroadband.co.za\/news\/?p=494475"},"modified":"2023-06-03T10:59:03","modified_gmt":"2023-06-03T08:59:03","slug":"the-rands-collapse","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/investing\/494475-the-rands-collapse.html","title":{"rendered":"The rand’s collapse"},"content":{"rendered":"

Since the ANC government took office in 1994, the South African rand has declined from R3.62 per US dollar to over R19.80 per US dollar.<\/p>\n

Over the last three decades, the rand\u2019s value has declined by 82% relative to the US dollar. It is equivalent to losing an annual compounded 6% in rand value for the 29-year period.<\/p>\n

2023 has been a particularly bruising year for the local currency. It weakened from around R17.00\/USD in January to over R19.80 this week.<\/p>\n

The rand weakness in the first few months of the year was caused by load-shedding, failing SOEs, an underperforming economy, greylisting, and portfolio outflows.<\/p>\n

More recently, the diplomatic fallout after the US Ambassador to South Africa\u2019s comments about selling weapons to Russia led to a sharp sell-off in the rand.<\/p>\n

It reached its worst-ever level against the US dollar, trading at R19.51\/USD on 12 May 2023. It continued to weaken and reached a new low of 19.87\/USD on Tuesday.<\/p>\n

George Glynos, head of Research at ETM analytics, warned that the rand could weaken to levels much lower than R20 to the US dollar.<\/p>\n

The biggest immediate risk is South Africa hosting Russian President Vladimir Putin at the BRICS summit set to be held in Cape Town in August.<\/p>\n

George Glynos, head of research at ETM analytics, said it would be incredibly dangerous for South Africa\u2019s economy to host Putin and not arrest him as the law requires.<\/p>\n

\u201cSouth Africa risks becoming a pariah state. It is not what we need right now,\u201d Glynos said.<\/p>\n

\u201cThe situation is very sensitive, and the further we go down this road, the more dangerous it becomes.\u201d<\/p>\n

\u201cNobody wants to see a rand trading at R21, R22, or even lower against the US dollar.\u201d<\/p>\n

The weak rand imposes an enormous cost on the economy and will plunge the country into a deep recession.<\/p>\n

Many South African businesses and leaders have highlighted that most of the economic challenges, which resulted in the weak currency, are self-inflicted.<\/p>\n

From unfriendly business policies to poor geopolitical decisions, the government has made the country hostile to investors.<\/p>\n

This was not always the case. Under former President Thabo Mbeki, South Africa showed strong economic growth and was a popular emerging market destination for foreign investors.<\/p>\n

However, under President Jacob Zuma, things changed, and the downward spiral accelerated under President Cyril Ramaphosa.<\/p>\n

Daily Investor compared the rand\u2019s performance under each South African President since 1994.<\/p>\n

\"\"<\/a><\/p>\n

\n

Nelson Mandela<\/h2>\n

When Nelson Mandela became president in 1994, the US dollar could buy R3.62. After his tenure, one dollar could buy R6.09.<\/p>\n

This translates to a 40.56% decline in the rand\u2019s value, converted to an annualised compounded decline of 12.19%.<\/p>\n

\"\"<\/a><\/p>\n

\n

Thabo Mbeki<\/h2>\n

During Thabo Mbeki\u2019s tenure, South Africa was prosperous and experiencing strong economic growth. The rand, however, still depreciated and lost 25% during his nine-year term.<\/p>\n

This is equivalent to an annualised compounded decline of 3.1% relative to the US dollar for each year of his presidency.<\/p>\n

Thabo Mbeki was the best president the ANC had delivered thus far when measured against currency strength.<\/p>\n

\"\"<\/a><\/p>\n

\n

Jacob Zuma<\/h2>\n

Jacob Zuma\u2019s presidency is tainted with low economic growth, corruption, and state capture. During his term, the rand depreciated by 30%.<\/p>\n

This is converted to an annualised decline of 3.8% relative to the US dollar over his nine years as president.<\/p>\n

\"\"<\/a><\/p>\n

\n

Cyril Ramphosa<\/strong><\/h2>\n

Cyril Ramaphosa has only served five years, and the rand has already lost 40.90% of its value relative to the US dollar.<\/p>\n

This translates to an annualised compounded decline of 9.98%.<\/p>\n

\"\"<\/a><\/p>\n

\n

This article was first published by Daily Investor<\/a><\/strong> and is republished with permission.<\/em><\/p>\n

Now read:\u00a0Rand craters after Reserve Bank hikes interest rates by 50 basis points<\/a><\/h3>\n","protected":false},"excerpt":{"rendered":"

The South African rand has declined from R3.62 per US dollar to over R19.80 per US dollar since 1994. We analyse the currency’s performance under each president.<\/p>\n","protected":false},"author":341111,"featured_media":494479,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[80335],"tags":[19252,1952,35,2910,11613,2630,78910,5624],"class_list":["post-494475","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-african-national-congress-anc","tag-cyril-ramaphosa","tag-headline","tag-jacob-zuma","tag-kgalema-motlanthe","tag-nelson-mandela","tag-south-african-rand","tag-thabo-mbeki"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/494475"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/341111"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=494475"}],"version-history":[{"count":0,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/494475\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/494479"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=494475"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=494475"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=494475"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}