Economist warns on weaker rand

2012-11-22 11:58

Johannesburg - The rand was expected to drop further in the lead-up to the holiday season, and could continue falling into next year, an economist said on Thursday.

The rand dropped this week to its lowest level in nearly four years, reaching R9 to the US dollar.

Chief economist at Standard Bank, Goolam Ballim, said the rand could weaken further in the lead-up to the end of the year and into 2013.

"There is a fear that it is likely to remain with us, and it suggests that it [the rand] is likely to be weak over the new term," Ballim said.

He said the depreciating rand also had the potential to "stoke inflation".

"It eventually translates into even higher electricity tariffs, tax rates and even higher prices for consumers," Ballim said.

This meant an increase in basic prices, and a reduction in buying strength.

Ballim said this could lead to impoverishment as the poor were most likely to be affected.

The depreciated rand could also make imports "pricey" and boost exports from South Africa.

Ballim said the rand had dropped for several reasons.

"Firstly SA exports have recently waned, and this is extended alongside output losses in the mining, and recently, the farming sectors," he said.

Downgrades by credit ratings agencies also played an important role.

"The downgrades signal that South Africa may be struggling to deal with lengthy socio-economic issues," Ballim said.

  • Alice - 2012-11-22 12:08

    Let the Rand drop and rise again after New year. Would benefit those sending money to their love ones this Xmas.

      ianon.ym - 2012-11-22 12:19

      You must be living in Wonderland ... Eish

      neil.white.7568 - 2012-11-23 21:33

      What weed are you taking . Like some of it.

      riaan.hermann - 2012-11-26 10:15

      Yip I agree working abroad earning USD

  • cynic.martian.3 - 2012-11-22 12:26

    What does the exchange rate have to do with electricity tariffs? All the components used to generate electricity (coal, labour, water, etc.) are local and not impacted by fluctuating exchange rates.

      sarel.esterhuizen - 2012-11-22 12:40

      Really, we produce all the oil powering all the supporting machinery and vehicles all of which are built and sourced locally?

      dumi.zulu.31 - 2012-11-22 13:03

      Not all critical inputs are sourced locally, e.g machine parts etc

      lucy.bush.9231 - 2012-11-22 13:19

      All thanks to Mr Zuma and his chommies..Thank you please leave..!!

      miehleketo.ndlovu.7 - 2012-11-22 13:49

      @Cynic since the rand depreciated, then our imports are gonna be expensive and exports cheap, which will increase the volume of exports and reduce the volume of imports.And this will lead local consumers to demand more goods and services in SA, hence high demand for SA's goods and services (including all the components used to generate electricity (coal, labour, water, etc.)).This high demand calls for high prices in general.

      patrick.buckley.712 - 2012-11-22 15:28

      Smell the roses Mieleketo...... The unions have all but destroyed all manufacturing in South Africa. Currently the wine industry is being destroyed, so we will have to import that too very shortly.

      Rational100 - 2012-11-22 20:00

      Three weeks back, local economists noted that the Rand needed to weaken further to avert a widening trade deficit... Our wish has been granted!

      anthony.m.sheffield - 2012-11-29 11:26

      contracts for the power generation machinery are all done in foreign currency. Spare parts come from abroad, and since we've got rid of all the competent white technicians, we have to get foreigners to come and do maintenance. Most probably you will find that the coal contracts are also done in USD.

  • timothy.whyte - 2012-11-22 12:33

    Thanks you so much anc for destabilising the mining and farming sector,you are only hurting yourselves as the people will find it harder to feed their families,unless this is what you want the people to do,"rise up" and then you get to shift the blame on the whites and apartheid and land re-distributuion

  • SarelJBotha - 2012-11-22 13:07 Lees hier en verstaan hoe banke basies elke persoon wat sogenaamd 'n lening maak, effektief belieg, bedrieg en van hulle steel....en baie (on)regsgeleerdes en regerings help hulle natuurlik onder die skyn van wettige optrede.

  • JNaMolefe - 2012-11-22 13:23

    No, not again!

  • anelda.bernardo - 2012-11-22 13:37

    Party keer kry ek die indruk ekonome eet en leef nie in die land nie of hulle word heeltemal teveel betaal. Ek hou van die woord keuse COULD lead to higher electricity and food prices....pryse gaan weekliks wat kan gebeur is dat die verbruiker gatvol gaan raak vir betaal en dan gaan geen maar geen prys verhoging deur gevoer kan word nie.

      stirrer.stirrer - 2012-11-22 13:49

      Definition of an economist: Somebody who can tell you tomorrow why that what he predicted yesterday, didn't happen today.

  • jacques.shepperson - 2012-11-22 18:53

    First they want it weak, them when you get what you wanted its also no good. Make up your mind please.... Rand should be 6:1 and should be controlled.

  • Rational100 - 2012-11-22 19:50

    SA being one of leading producers of gold should know better that come 1 January 2013, Gold will become a top tier currency curtesy of of the "Currency influencers" in Switzerland. As a member of this grouping, hopefully SA has stock piles of gold as this will be the basis of money creation going forward to curtail currency wars through the current world system of fiat currencies. The instability of the mining sector in SA lately is therefore not helpful.

      anthony.m.sheffield - 2012-11-29 11:30

      SA is not "one of the leading producers of gold" anymore. We now produce less than we did in 1914 and lie somewhere around a distant fourth. If you want the full details of using gold as a backing for currency (not a currency in itself) read "currency wars" by James Rickards. BTW, our gold reserves are miniscule on a world basis.

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