The local currency could be in for more volatility as political push-and-pull raises uncertainty. (Getty)
Already weak amid deepening concerns about the country’s energy crisis-hit economy, the rand was sent into a tailspin on Thursday — recording its worst crash since the pandemic.
The rand weakened past R19 (R19.36) for the first time since April 2020. This is as investors mull the impact of prolonged and severe load-shedding on South Africa’s economic prospects, which stand to get worse amid what appear to be growing diplomatic tensions over the state’s stance on Russia.
On Thursday, News24 reported that the United States ambassador to South Africa, Reuben Brigety, accused the government of supplying arms to Russia, abetting Moscow’s assault on Ukraine.
Russia has been on the receiving end of a spate of economic sanctions owing to its invasion of Ukraine last year. Even so, South Africa’s government has refused to break ties with Russia, which the country has struck an economic alliance with through Brics.
Russia’s president, Vladimir Putin, reportedly plans to attend the 15th Brics summit in Durban later this year. This is despite the International Criminal Court having issued an arrest warrant for his alleged role in war crimes committed by Russian soldiers and mercenaries in Ukraine.
According to spokesperson Vincent Magwenya, the presidency has noted the US ambassador’s reported remarks and will respond in due course.
Meanwhile, investors continue to digest the effects of load-shedding’s onslaught on the economy, which — according to forecasts — is set to grow less than one percent in 2023. Earlier this week, the country was yet again plunged into stage six load-shedding.
This is as the energy crisis stands to rob R457.9 billion from the country’s GDP, according to Electricity Minister Kgosientsho Ramokgopa’s prognosis.
In March, the South African Reserve Bank revised its GDP forecast lower to 0.2%, reiterating that the energy crisis stands to shave two percentage points from growth this year. The central bank’s forecast is still higher, although only slightly, than that of the International Monetary Fund, which expects the country’s economy to grow 0.1% in 2023.