CURRENCY
The rand, trade, and the cost of uncertainty
The rand has remained competitive for South African exporters, but its volatility continues to complicate trade, pricing, and investment decisions in an economy deeply exposed to global capital flows.
By Brian Kantor, Investec: Investment Management
Foreign trade plays an important role in the SA economy. Exports account for roughly 30 % of demand, while imports contribute a similar share of supply. Almost all of this exchange happens in foreign currency, mainly US dollars, at exchange rates that are highly variable and hard to predict.
For exporters, importers, and businesses competing with imports, this creates persistent uncertainty. Rand revenues and rand costs can shift materially over short periods, making business planning more difficult. This exchange-rate risk has long been a burden for South African companies, which often have to hedge their short-term exposures at considerable cost.
The volatility of the USD / ZAR exchange rate remains high, even though the rand has strengthened and inflation has eased since 2023. Global shocks, including movements in oil prices, continue to add to rand volatility.
Since 2000, the annual increase in the rand cost of a dollar has averaged about 3.7 % a year, but with wide variation around that average. The standard deviation around this average has been more than 15 % a year. Meanwhile, volatility measured over six-month or three-month periods has also remained pronounced.
64 sabusinessintegrator. co. za