- Rand’s year to date (YTD) losses have widened by more than 10%
- The Rand trimmed losses to 19.1 on the 16th of May 2023
- However, it is still one of its worst performances in 2023
Harare- Following the accusations that South Africa’s government supplied weapons to Russia by the United States, Rand’s performance has been dismal.
After the accusations, the Rand flopped to trade at 19 against the US Dollar, the lowest since April 2020. Year-to-Date, the Rand has depreciated by more than `10%.
On the 12th of May the following day, Rand plunged to 19.3 before trimming back losses to 19.1 on the 16th of May 2023.
However, the future of the Rand remains clouded amid the US tensions and the power crisis.
The parastatal-owned power utility, ESKOM continues to struggle in providing enough electricity to the nation due to a busload of reasons including ageing power plants and alleged mismanagement of funds.
Rand’s struggle is indicative of two major points, lack of transparency in government-owned entities and the need to consider privatisation as well as the need to preserve economic needs over political needs.
South Africa has been plagued by persistent power cuts since 2008, with the situation becoming more severe in recent years, attributed to the troubled state-owned power utility Eskom, which has a history of significant financial losses and poor planning.
Furthermore, allegations of mismanagement and corruption within Eskom have contributed to its current state.
The ongoing power crisis has had a significant impact on the country's economy and productivity, resulting in supply chain disruptions, higher production costs and, consequently, elevated inflation.
The relationship between South Africa and Russia (BRICS members) is likely to brew tensions between Southern Africa’s economic giant and its largest second trading partner, the United States and even the United Kingdom, an unconditional ally of the United States.
Tensions between the two nations are likely to escalate further, causing more harm to the Rand given the Russian President, Vladimir Putin attends the BRICS summit to be held in South Africa this year.
With such an escalation of conflict of interests, the South African government needs to make use of diplomacy, prioritising economic needs over political ones to safeguard its governance and the economy at large.
However, the decline of South Africa’s Rand is a doubled-edged sword to Zimbabwe.
As the Rand plummets, it means Zimbabweans can import more from South Africa using a few dollars.
However, remittances from South Africa, especially in US dollars will plummet as it will not be affordable for many to send US$100 back home using a weak Rand.
The other negative factor is the downsizing of the economy through a surge in imports. With basic goods stripped of paying duty, local manufacturers will feel the pinch as people will go for the cheaper imports against local products.
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