Rand’s perfect storm

TODAY’S RAND depreciation, the so-named flash crash, is the result of several factors, many of them self-inflicted.

Although analysts attribute the drop as a reaction to the blow-out in the Chinese market, and the fallout from the  Nene fiasco, there are several important factors, all of which contribute to Rand volatility.

  1. Over-reliance on Chinese imports, this retail (arbitrage) model creates dependency on Yuan-Rand exchanges.
  2. Too much debt, not enough liquidity = Rand vulnerability. Insufficient savings, a culture of spend as if there is no tomorrow. South Africans need to be saving more, see new tax free savings accounts. A highly indebted nation.
  3. Emphasis on the dirigiste economy, shackles growth by removing competition in key areas, including transport, telecoms, energy and health. Instead of bailing out SAA, government could settle sovereign debt while taxing the sector.
  4. Twenty years of bashing neoliberalism and open markets without providing functioning, workable alternatives. The experiment with a mixed economy has shown that the dirigiste-side has failed. Time to move on from ideology towards long-term stability.
  5. Caving into the Agoa trade war, not being pro-active enough and too readily resorting to the begging bowl, shows weakness. Why is South Africa not marshalling support within the AU and SADC where trade is concerned? Why are we in a currency war?
  6. Punching above our weight when it comes to BRICS, and not being active enough when it comes to African Unity, the good story in our backyard. Both Angola and Mocambique have been booming. Trade with Mocambique, an economy whose GDP Annual Growth Rate averaged 6.36 percent from 2000 until 2015, is increasing, this good story gets lost when we appear to be the weakest member of BRICS. Angola, another neighbour recorded growth rate of 3.8 in 2015 and looks set for 4.1 in 2016.
  7. Not managing inequality and  wealth distribution via a social wage and instead resorting to political brinkmanship, mob violence and threats of expropriation, which inevitably spook markets. Does the social contract need to be explained to the masses, who will benefit indirectly from capital inflows such as the listing of Ab InBev, and directly from government grants funded via taxation?
  8. Foreign policy, backing corrupt regimes such as Assad, Omar al-Bashir, and Hamas, and not standing up for human rights when it comes to issues such as the Dalai Lama, Myanmar, Syria, all affecting sentiment.
  9. Weak national leadership, a president who increasingly appears to be the ruler of one province, the emergence of tribalism and other demands, which all stem from the administration’s own policies. The flipside of this is are Zuma’s global ambitions, at the expense of national unity. A party that comes before the country. See Zuma’s Afrochinistan Affair.
  10. Insufficient attention to South Africa’s image abroad. SABC remains invisible when it comes to the important issue of connectivity via the Internet. Why is the national broadcaster not available alongside RT, Al Jazeera and BBC?
  11. Erosion of civil liberties and human rights within the country, as evidenced by several pieces of legislation before parliament, each one seeking to remove key individual rights protected by the constitution, acts as a disincentive to investment.
  12. Lack of coherent industrial policy and marketing of SA brands abroad. Where are the special economic zones? NDP appears to be nothing more than a talkshop, without follow-through from government. Where is the next economy, how is South Africa planning for the future?

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