Glum exporters track strengthening rand

Although the rand has been gaining serious strength against the currencies of our major trading partners – particularly against the US dollar – for the past six weeks, not everybody is happy. Importers and local buyers of imported goods are happy, as prices ease back, and help to keep inflation in check. But most SA exporters have glum faces, especially where their export products have already been battling to stay pricecompetitive in the fiercely competitive global market. The fact that the rand slipped below the R8/US$ more than a week before the end of August, and has remained firmly in the sevens, has consistently put pressure on the price-competitiveness of SA exports. Even SA Reserve Bank (SARB) governor Tito Mboweni has expressed worry about this on-going rand strength – warning that the central bank was “increasingly concerned” about the effect on SA. “This matter is receiving our attention,” he said after the bank’s AGM, at a time when the rand had just hit a new 13-month peak at R7.29/ US$ – adding to the big gains already this year, eroding export competitiveness and threatening the potential economic recovery. So the rand is too strong. Where should it be? “Up to now,” said Standard Bank economist, Dr Johan Botha, “R8.50/US$ has been considered a neutral exchange rate – where it doesn’t have too negative an effect on either import or export costs, or on inflation.” Although he acknowledged that Mboweni had been talking about the rand being too strong, he declared it was not clear how the SARB would look at it because it’s good for SA inflation. And, although the currency is strong, it is not so much the rand performing, as it’s the US dollar not performing – and it is as yet not apparent where that will go. “Maybe they don’t need to stimulate the economy,” said Botha, “as a large number of markets around the world are actually showing better import demand growth than anticipated – which would be good for our exports in the longer-term.”