Rand hits a four year low

By Staff Writer

The rand has dropped to a four year low against the dollar today (22 August) after wage talks in the gold sector came to a halt.


According to reports, an impending strike would inflict more damage to the country's economy that is already losing $60 million (R615 million) a day due to the strike by the 30 000 workers in the car manufacturing industry.


According to Rob Spanjaard, director at Rezco Asset Management, the rand is hovering around the R10 to the dollar once more,  due, due to a number of factors including the impact of pending quantitative easing in the United States and better-than-expected retail sales data out of the U.S.


In October 2012, Spanjaard warned that the rand could end up collapsing to more than R10 to the dollar.


The aftermath of the rand’s recent performance
But not all economists feel the rand’s recent performance is an indicator of doom and gloom. Dr Azar Jammine, chief economist at Econometrix, said that following the steep depreciation of the rand over the past year, analysts have been impressed by the subdued extent to which inflation has responded in an upward direction.


“On previous occasions when the rand depreciated sharply, the impact in terms of pushing up inflation has been fairly dramatic. This has not been the case with the depreciation of the currency over the past two years. The difference this time is that the rand has, believe it or not, depreciated much more slowly since it first began doing so in a meaningful way in July 2011. It has taken more than two years for the currency to decline from R6.70 to the Dollar in July 2011, to its current exchange rate around R10. This magnitude of depreciation on earlier occasions outlined above took place in a matter of months,” said Jammine.


The impact of labour demands
Jammine added that there are concerns on the labour front that the fairly aggressive demands by labour for pay increases, might lead to significant wage inflation that gets fed through into higher consumer price inflation.


 “It is, however, not obvious that increased wages will necessarily translate into higher inflation. What really counts here is the extent to which the overall wage bill of companies increases. If substantial wage increases are awarded, but the employment component of such companies decline, then the average increase in the wage bill need not exceed inflation for the company materially and might then not be a source of increased inflationary pressure. In many instances this appears to be the case,” said Jammine.


He added that whether through attrition or active retrenchment, companies are succeeding in restraining the increase in their wage bill which will not necessarily mean an increase prices to compensate.

 

Recent Articles

Featured The real tax benefits of retirement annuities

We all know that having a retirement annuity (RA) helps us to retire comfortably and with dignity. But what many people miss are the tax benefits that are linked to an RA.

Request your credit report from the right bureau

With so many different credit bureaus in South Africa, it may be difficult to decide from which one to request your credit report. We have a look at what you should be aware of when selecting a credit bureau.

Applying for a home loan? Consider the repo rate

When you apply for a home loan, one of your top priorities should be to secure a low interest rate. In order to achieve this, you need to be familiar with the repo rate. We find out more about this.

Effective financial planning as a single parent

As a single mom or dad, it can be challenging to keep up with the ever-increasing expenses of raising a child. We have a look at the importance of setting up a budget as a single parent.

Deals

The President Hotel’s Sunday Lunch Special

Price: From R250
When: From 30 January 2022
Where: Cape Town

The Vineyard Summer Special

Price: Available on request
When: Until 28 February 2022
Where: Cape Town

Pure Day Spa Laser Treatment Special

Price: Available on request
When: Thursdays
Where: Durbanville


Latest Guide

Guide to debt rehabilitation solutions