Friday/ shocks to the South African Rand

There is outrage in South Africa over President Jacob Zuma’s firing of finance minister Nhlanhla Nene – with no explanation offered – this week.  Nene was well-respected and one of a few in the government untainted by corruption scandals.   The nature of the disagreements between him and Zuma are not known, but speculation has it that it may have been over yet another bail-out needed for the beleaguered South African Airways, or even over the projected capital expenditures for building several nuclear reactors for the national electrical utility company Eskom.

Anyway : all of this had the South African Rand fall to a record low of R16.05 per dollar before improving to R15.76 by 7:04 p.m. in Johannesburg on Friday.  I remember a time in 1990 upon my first visit to the USA, when the exchange rate was R2.50 to the dollar. My dad used to explain to us at the dinner table that a higher exchange rate would normally favor local (South African) manufacturers and exporters .. but at some point, imported items would become prohibitively expensive.   The current exchange rate cannot possibly be good for the country.

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Check out a graphic that I had compiled, of the exchange rate that goes back all the way to 1961 when the South African Rand came into existence. The exchange rate held steady until 1980 after which it continued to go up. Where will it be in another few years?
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When the South African Rand looked like this in the 1960s, it was on a par with the US dollar. Dutchman Jan van Riebeeck is featured on the currency.  Van Riebeeck’s party of three vessels landed at the shores of the modern-day Cape Town on 6 April 1652.

 

 

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