Rand Report: From green and gold to grey

Rand Report: From green and gold to grey. Image: Supplied

Rand Report: From green and gold to grey

Since the beginning of the year, the South African rand has shed considerable value against its major counterparts.

Rand Report: From green and gold to grey

Rand Report: From green and gold to grey. Image: Supplied

The rand continues to drown in deep water as domestic shocks plague the shaky South African economy. Power struggles, both literal and political in nature, continue to prevent the country from attaining prosperous growth. As global sentiment turns sour, the nation’s leadership fails to produce viable solutions.

The most controversial development over the last two weeks relates to André De Ruyter, the departing CEO of Eskom. De Ruyter appeared in an exclusive interview with the intention of exposing the systemic corruption that infests the country’s state-owned power provider. 

De Ruyter claims that approximately R1 billion per month is lost to corruption within Eskom. He explained the general pattern of the alleged theft, which involves sabotage by those within the corruption-infested loadshedding provider. He claims that low-ranking individuals are bribed to damage machinery and equipment, with the aim of attaining additional tender funding.

Apart from these power problems, South Africa’s recent “greylisting” provides another genuine reason to be pessimistic. The Financial Action Task Force (FATF) added South Africa to their global grey list, further highlighting the sour outlook towards the South African market. With the current dire state of the economy and low GDP growth outlook, it is not surprising that global players are losing faith in the faltering state.

The impact of this downgrade will be both economic and reputational and will reduce the competitiveness of South African businesses on a global scale. It is likely to lead to a significant reduction in capital inflows, due to the higher level of perceived investment risk. The greylisting will also lead to a decrease in foreign direct investment because of enhanced due diligence requirements and heavy transaction costs. The greylisting will also add weight to the country’s ability to obtain affordable finance in the international market. 

Since the beginning of the year, the rand has shed considerable value against its major counterparts. The USD/ZAR pair appreciated 6.92%, rising from R17.05 at the beginning of January and reaching a high of R18.51 towards the end of February. The pair closed at R18.22 on Friday.

The GBP/ZAR pair experienced a similar price movement, moving 6.40% to the upside. After climbing from R20.61 to R22.33 during the first two months of the year, the pair ended last week at R21.93.

EUR/ZAR made a comparable 6.30% move, after starting the new year at R18.23. The pair topped out at R19.62 last week and closed at R19.38 on Friday.

There is a similar trend with the AUD/ZAR pair, which has gained 5.69% since 1 January. The pair opened at R11.60, soared to a high of R12.58, and ended last week at R12.26.

Upcoming market events 

Tuesday, 7 March

ZAR: GDP growth rate (Q4)

AUD: RBA interest rate decision

AUD: Balance of trade (January)

Wednesday, 8 March

USD: Fed Chair testimony

EUR: ECB President speech

USD: Balance of trade (January)

USD: JOLTs job openings (January)

Thursday, 9 March

ZAR: Business confidence (Q1)

Friday, 10 March

USD: Nonfarm payrolls (February)

USD: Unemployment rate (February)

GBP: GDP growth rate (January)

Get our Daily Rand Report delivered straight to your inbox every weekday to keep on top of everything happening with the ZAR. 

Check out the Sable International Currency Zone to get the latest live exchange rates and easily transfer your money into or out of South Africa.