Fluctuating rand more troublesome than weak pound

The devaluation of the pound against major market currencies might not have any impact on South African exports. The pound recently tumbled to a seven-year low against the dollar and there are economists who believe it might soon even equal the euro.
However, Anton Rabe, CEO of the Deciduous Fruit Producers’ Trust, said in the long run South Africa would have to consider shifting fruit to other markets with higher returns if the pound fell significantly against the rand. But for now returns generated are still very good and don’t seem to be much affected by the recession.
“People only seem to cut down on long term needs, such as making home improvements or buying new cars,” said Rabe. “They still need to eat.” But he added this statement might be premature, as fruit exports would only hit their peak from the first week of February.
Chairperson of Wine Cellars South Africa Henk Bruwer said the rand’s volatility makes it difficult to say if it’s better to sell in EU or Asian markets, which trade in US dollars. Bruwer added that one of the problems with the rand is that its value is based more on the country’s political climate than its true value.
Michael Keenan, a currency specialist at Standard Bank Global Market Research, added the rand is highly sensitive to global risk and the same factors weakening the British currency would also affect the South African economy. A drop in the British economy wouldn’t necessarily mean the rand will strengthen against the pound in the long term.
Keenan thinks it’s highly unlikely the British will shift from the pound to the euro at this stage. He said the pound’s weakening is just a short-term trend in the recession and everybody still recognises it’s strength as a currency. Further, the pound has a lot of sentimental value for the British. – Glenneis Erasmus