CLAIRE KEETON, Johannesburg | Thursday
THE repercussions of the September 11 attacks on the United States are hitting South Africa hard, with the rand plunging 9,5% against the dollar since then.
“Now we have a rolling crash … a steady looting of South Africa,” said Patrick Bond, an economist at the University of the Witwatersrand in Johannesburg, calling for exchange controls to be imposed.
The attacks, leading to a worldwide drop in consumer demand, are also expected to hit South Africa’s exports of gold, diamonds and other minerals.
Diamond giant De Beers has already modified sales projections downward, and bankrupt Swissair will be forced to sell its 20% stake in South African Airways.
The rand, which has been falling virtually every day since terrorists flew passenger planes into the World Trade Center in New York and the Pentagon in Washington, was trading at 9,36 to the greenback (8,57 to the euro) on Wednesday compared to 8,50 to the dollar (7,65 to the euro) on September 10.
But the free fall has not shaken Reserve Bank governor Tito Mboweni, who told the National Assembly on Friday that the bank’s priority remained inflation targeting, not protection of the currency.
“Let’s soldier on and hopefully the market will notice that (South Africa is) not doing badly and will begin to buy rand,” he said.
Mboweni warned against currency speculation, calling on banks to implement foreign exchange regulations strictly and make sure transactions were for “honest, legitimate reasons”.
Market analysts blamed speculators and external pressures for the rand’s depreciation rather than problems within the country.
Investors are seeking safe havens after the terror attacks and emerging markets have been negatively affected as a result, noted independent analyst and stockbroker Andile Mazwai.
“Investors are far more risk-averse and forex is exiting emerging markets, putting their currencies under pressure,” he said, pointing to the plunge in the value of Brazil’s real.
Kevin Wakeford, the chief executive officer of the South African Chamber of Business, underlined this point, declaring South Africa was better off than Brazil, Turkey or Chile at the moment.
Standard Bank group economist Iraj Abedian said: “The attacks have clearly adversely affected the South African economy and the main adverse effect has been on the exchange rate.
“The uncertainty has led to a flight (of capital) from emerging economies,” he said.
“If the northern countries go into recession and are more cautious about spending, this will affect both tourism and the demand for South African exports,” said Asghar Adelzadeah, research director for the Johannesburg-based National Institute for Economic Policy.
He added: “The Reserve Bank is trying to prevent a recession … The new governor (Mboweni) is more concerned about growth and less tempted to safeguard the rand.”
Political problems like South Africa’s proximity to Zimbabwe with its lawless land seizures and President Thabo Mbeki’s controversial response to the Aids pandemic have often been blamed for the rand’s depreciation, but these do not explain its recent plunge.
“Apart from the usual suspects of Zimbabwe and Mbeki’s views on Aids, nothing has changed,” said Reg Rumney, research director of the Johannesburg-based business consultancy BusinessMap.
“There are no new major factors locally that could be detected for the fall of the rand,” he said. “Like everyone, I’m puzzled.”
Rumney observed that the slow pace of privatisation in South Africa could negatively affect the rand.
“Privatisation would help put the currency on an upward path with the inflow of capital and a decline in the forward book,” he said.
“We are in the same boat as other emerging markets but that is small comfort for a country that is doing everything right, despite some political errors.”
Most analysts said they believed that the rand was likely to recover — as it did after plunging to a then low of eight against the dollar in October 2000 — because the country’s macro-economic fundamentals were in place. – AFP