Rand hits R11 low against the US dollar

By Staff Writer
Nicolette Dirk, finance writer, justmoney.co.za
 
Election watch 2014: Following the platinum mine strike that kicked off on Thursday 23 January, the Rand plummeted to R11 against the dollar, reportedly the lowest it has been in five years.
 
 Commentators predict that the weak currency will push up food prices, fuel and impact on South African imports.
Efficient group economist, Dawie Roodt, told Justmoney earlier in the week that the Rand’s poor performance against the dollar for the past two weeks is the main cause of the anticipated 35 cents petrol price increase.
 
The writing was on the wall
 
Econometrix economist, Manqoba Madinane, predicted the R11 slide in mid-2012 but said he does not foresee more downslide for the Rand.
“The strike in the platinum mining industry has been the main catalyst for the slide in the Rand but it has been overdone recently. It won’t slide much further this year,” said Madinane.
 
But Madinane warned that the weakening Rand does spell trouble for South Africa’s interest rates. Volatile labour relations, coupled with the fact that the country’s economic growth has underperformed, could mean that the Reserve Bank will have no choice but to push up the interest rates.
 
“Investors have been growing more negative about the Rand and this year’s labour relation issues are a big problem,” said Madinane.
 
What will this mean for consumers?
 
While consumers already have to anticipate the rise in food and electricity cost, Madinane said the prospect of a spike in the interest rate could hold more problems for the average household budget.
 
“If the interest rate goes up, things will cost even more and consumers will be left with less disposable income. If the Rand remains as weak as it is for a long term, the Reserve Bank won’t have a choice but to raise interest costs,” said Madinane.
 
But the upcoming elections could put a brake in the interest spike and Madinane said the Reserve Bank is unlikely to act until well after the elections.

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