Rand volatility stunts SA’s economic recovery

This week the strengthening rand lost momentum when the local currency weakened by 0,13% against the US dollar.

Wandile Sihlobo, lead economist at Agbiz, said the currency depreciation has largely been driven by domestic political risks following reports that the minister of finance Pravin Gordhan could be arrested.

Prof Nick Vink from Stellenbosch University told Farmer’s Weekly that the most worrying effect of the rand’s growing volatility is the negative impact on the economy. “This is not good for the economic recovery that we need so badly,” Vink said.

South Africa’s economic woes are not unique to the country, he added. Many countries are exposed to rising inflation. Worldwide, volatility is also increasing in commodity prices, exchange rates and interest rates. “But political uncertainty in the country is making our situation worse,” said Vink.

The depreciating currency will have both positive and negative impacts on the prices farmers receive for commodities, and on what they pay for inputs.

Sihlobo noted the following:

  • Domestic maize and wheat prices will continue to receive good gains on the back of the weaker rand.
  • Maize imports for the 2016/2017 season: 2,7 million tons yellow maize; 1,1 million tons white maize.
  • Wheat imports: 1,2 million tons. Additional imports of about 800 000t until 30 September 2016 could bring this season’s total wheat imports to 2 million tons.