The collapsing SA Rand suffers its longest run of quarterly losses on record and it may continue into year-end, while South Africa’s trade deficit almost doubled, from R6.8-billion to R16.3-billion. Meanwhile, the National Treasury is predicting South Africa's ailing economy to grow at only 1.7 percent this year.
The currency posted its 10th straight quarterly drop against the dollar in the three months through September, the longest stretch since at least 1971, when Bloomberg began compiling the data.
“Our economic fundamentals are not a good story and I can’t see the commodity cycle turning. We’re probably going to see more rand weakness.”
The currency retreated to its weakest level since January, closing in on the lowest since October 2008, after South Africa’s trade deficit widened more than economists’ estimates in August. The shortfall climbed to 16.3 billion rand ($1.4 billion) from 6.8 billion rand and more than the 8.7 billion- rand median estimate of 14 economists in a Bloomberg survey.
Take note: South Africa’s trade deficit almost doubled, from R6.8-billion to R16.3-billion
Raw materials accounted for 60 percent of exports in 2013, with South Africa's new colonisers, China, being the biggest buyer of coal, iron ore and other mining commodities. In the meantime, China's economy will be growing at its slowest pace in more than two decades.
“Should China experience further slowdown, the rand will likely weaken as commodity prices ease once again,” Annabel Bishop, the Johannesburg-based chief economist at Investec, said.
Investec revised its year-end forecast for the rand to 10.92 per dollar, compared with a previous forecast of 10, and said there is a 45 percent probability of a “down-case scenario” that could see the currency depreciate to 11.70 this year and 12.70 by the end of 2015.
The National Treasury is predicting South Africa's ailing economy to grow at only 1.7 percent this year.
“Even with an end to the worst of the industrial unrest, South Africa’s problems are not over,” Razia Khan, a London- based Africa economist at Standard Chartered Plc, said in an e- mail yesterday. “There is no evidence of a hoped-for automatic correction in external metrics. The rand may have to adjust further.”
A friend added the following:
"I did a quick calculation yesterday (which I posted on my wall) taking the run rate of the Rand over the last few months (source Oanda.com) and it is my prediction the Rand will be somewhere between R11.70 and R12,70 by year end. The Rand is losing 6% of its value month on month for the last three months. The slide started to happen on the 27th July 2014 and the stats after that don't lie. Most importers of electronic goods - myself included - are already costing at R11.55 / USD with many of my compatriots stating that they are moving to costing at R11.70/USD and we are nowhere near year end yet."
Rand endures record 10th quarterly decline