Real Estate Investor Magazine South Africa September 2016 | Page 54

ATLANTA PROPERTY
EXCHANGE
RATES

Make
hay
while
the
Rand
shines
Why South Africans should start looking at the UK
BY ANDREW RISSIK

First things first: Why is the Rand so strong
right now?
None of South Africa’s economic fundamentals have
shifted in any meaningful way since the flash crash
of December. So why is the Rand continuing to gain
ground on the major currency pairs?

The answer has more to do with what’s going on
outside our borders than with what has happened
within. As investors face an increasingly lifeless global
economy, they are shying away from low-to-negative
interest rates found in most developing countries right
now. South Africa is one of the few countries were
yields are actually positive for investors with liquid
assets. Thanks to this, a dovish Fed and unforeseen
events like Brexit, the Rand is in an undeniably purple
patch.
As more short-term yield seekers buy into Rand
strength, it may just happen that the currency will
strengthen further in the short term. On top of this,
I see the ZAR as remaining undervalued at current
prices, so you can expect buyers to keep buying in
until we get closer to the Rand’s real value. This has
created a window of opportunity for investors holding
Rands to invest offshore at great rates.
To be clear, we are in a honeymoon phase right now.
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SEPTEMBER 2016 SA Real Estate Investor

So make hay while that sun shines and consider
getting some of your investments offshore while these
great rates last. This is particularly true for the Pound,
which has nose-dived in recent weeks.

Brexit and the Pound’s plunge

While the current noise around Brexit is all but
deafening, the truth of the Pound’s current decline
goes back much further than 24 June. The Sterling
has been struggling against the USD for some time
now, and the UK’s economy had been slowing in
general long before the European Referendum Act
of 2015 was approved in Parliament by the House of
Lords in December 2015.
Some are quick to point out that the UK will be
worse off when it leaves the EU trading block. I
am of the opinion that, free of the EU, the British
may now able to take steps to arrest their years’ long
slow decline. Without the heavy regulation and
bureaucratic requirements of the EU, the UK will
now be able to more nimbly alter its trade agreements
and central bank policies.
Good governance is about decisive and measured
action. What I’ve seen coming out of the UK post24 June has confirmed that the Brits still know what
they’re doing when it comes to navigating stormy
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