This is not the first, and I have a strong premonition it wouldn’t be the last. Consistently our economy is on a fast track to outclass the degradation of the most degraded economy in the history of collapsed economies. At the rate the rand is plunging, we need no soothsayer to tell that our economy is about to hit a major attack of paralysis. Africa’s most advanced economy is shrinking to strangle and choke us up with hardship.
We were agitated the previous week when the rand fell to a record low. Then, there were renewed concerns regarding China’s economy, and we witnessed market sell-offs which saw stocks drop more than two percent. The already weak South African economy was rendered helpless as records indicating the deteriorating conditions of business confidence in our economy circulated around the globe.
And just as we’re adjusting to the previous damages, the rand yet again, went on with its downward spiral, dropping to another record lows against the US dollar. This time, it nosedived to R17,99. Relating this development, Reuters in its report, revealed that;
South Africa’s rand tumbled to a fresh record low against the U.S. dollar in erratic Asian trade on Monday, with dealers talking of Japanese sellers in a very illiquid market…The U.S. dollar surged as much as 10.3 percent at one stage to reach 17.9950 rand and was last quoted at 17.2500, a huge move from 16.3150 late in New York on Friday…Dealers said Japanese investors were selling rand for U.S. dollars, where there was at least some liquidity, and then exchanging those dollars for yen…The resulting flows pushed the yen up broadly, with the dollar dropping as far as 116.70 yen from 117.27 late on Friday.
Commenting, the Chief economist at ETM Analytics, George Glynos told EWN that South Africa is under a great deal of pressure. “I think this is going to elevate pressure on the Reserve Bank. This kind of volatility could very well prove recessionary for South Africa,” he said. Glynos attributed the cause of the recent drop to the emerging market turn offs and to the statements made by the president, Jacob Zuma.
According to Glynos, Zuma’s statement justifying his unceremonious removal of the former finance minister, Nhlanhla Nene may have triggered the rand panic and subsequent drop. To him, the president’s attempt to play down the events (errors) of the previous year is unhealthy. “I can’t really find anything other than President Zuma playing down the events of last year,” he said.
Also, Economist Mike Schussler from Economists.co.za unveiled that the rand lost 25.9% of its value last year. With that, he revealed the “If the rand should fall just another 20% over the next year… by the beginning of 2017 a dollar would cost R20.”