/ 18 May 2023

Ramaphosa’s South Africa and Turkey’s Erdogan find themselves in a dangerous place. Our currencies tell the story

Ramaphosa Erdogan
President of Turkey, Recep Tayyip Erdogan (L) speaks with South African President Cyril Ramaphosa (R) during a special session entitled 'Fair And Sustainable Future' as part of G20 Leaders Summit in Buenos Aires, Argentina

Some years back, I had the sad, sorry and very often interesting job of being a markets editor, a position in which you are observed with the gainers and losers on the JSE, the strength and weakness of the rand on a daily basis. Of the two, the rand in particular — because of its liquidity — is the most volatile.

After a while, you get the idea that daily moves of the rand are not to be followed with your heart; the moves can induce a heart attack. So, I stopped running to the front page every other day with a story of rand decline or gain, unless what I was witnessing was something that I could paint as a longer term and a structural shift in the currency. 

This helped ease my anxieties about the rand that has been on a weakening ticket for well over a decade. The repricing, I’d made my mind up, was more a matter of emerging market nations losing their appeal because the investment world wanted more US dollars, Facebook, Amazon, Google and anything touched by Elon Musk. (Well, until his Twitter acquisition.)

Once in a while though, I drag out a long-term graph of the rand exchange rate. It has, for the most part, reaffirmed this global shift (investors scurrying to US dollar assets for higher growth) and I feel we aren’t alone in suffering from a strong dollar. 

But the rand’s sell-off over the past year alone, weakening close to 15% against the dollar, is making me worry a whole lot more than normal. A decade ago, investment markets grouped the rand together with the currencies of Brazil, Indonesia, India and Turkey and named them the “The Fragile V”, to the irritation of former Reserve Bank governor Gill Marcus. When comparing the rand’s performance to these currencies this year, we are in the same boat as Türkiye. Not good. The Brazilian real has strengthened and so has the Indonesian rupiah, the Indian rupee cooling their inflationary temperatures.

We aren’t in a good neighbourhood, and are now being thrown into “Cold War” power games to boot. It is time to fret over the rand and the damage its continued depreciation — particularly at this pace — will do to the country. Well, my answer today is yes. Thank the heavens, I am no longer markets editor and can now buy my head in the sand with some anxiety meds.

We are in a sensitive and rather precarious position at the bottom of Africa right now, we really are.