Back in November 2017, the rand was performing well, as news and rumours spread that Cyril Ramaphosa was edging ahead in the race for the presidency against Nkosazana Dlamini Zuma.
In December 2017, Ramaphosa won the battle for the head seat in the governing party, the ANC.
Markets cheered and the currency went from strength to strength as optimism took over in the country under its new leadership.
After Ramaphosa became president, the rand went from R14.47 against the US dollar to R11.55.
Fast forward to May 2023, the rand has had a horrible time, reaching record lows, with the currency trading at R19.75 against the US dollar, at 10.35am on Wednesday morning, 0.3% weaker than its previous close.
Under Ramaphosa’s helm, the country then went into a pandemic and struggled with harsh Covid-19 lockdowns, which battered the economy.
Shortly thereafter, as restrictions were lifted, the president was embroiled in the Phala Phala farm scandal.
While the president dealt with all of the above, the rand slowly weakened and so did the state-owned power utility, Eskom, which would then bring on the worst energy crisis in the history of South Africa.
The country has had to deal with enforced rolling blackouts, dubbed load shedding by Eskom.
The effects of the power cuts have had a disastrous effect on the economy, with growth forecasts being slashed by many, and putting the country on a path towards a recession.
Consumers are also contending with a cost-of-living crisis, as inflation soars and fuel prices see-saw on a month-on-month basis.
Adding more salt to the wound was the aggressive interest rate hiking cycle that the South African Reserve Bank set out on. SARB’s Monetary Policy Committee (MPC) unanimously decided to increase its benchmark lending rate for the 10th consecutive time in two years at the meeting held in May.
The bank hiked the repurchase rate (repo rate) by 50 basis points from 7.75% to 8.25% per annum, meaning that the prime lending rate will now increase from 11.25% to 11.75% per annum.
The central bank has now hiked rates by 475 basis points of tightening since its hiking cycle began in November 2021.
The country was also greylisted and faces the risk of financial instability if it courted Russia, which would lead to capital outflows and sanctions, the SARB flagged just earlier this week.
SARB said in its Financial Stability Review, released yesterday, that the most notable country-specific vulnerability was the increasingly detrimental and widespread ramifications of an insufficient and unreliable electricity supply, while concerns over the deteriorating South African rail and port infrastructure networks also continued to grow.
The diplomatic fallout resulting from the comments by the US ambassador to South Africa on May 11 led to a sharp sell-off in the rand and its worst-ever level against the US dollar, trading at R19.51 to the US dollar on May 12.
“South Africa’s non-aligned stance in the war between Russia and Ukraine is increasingly being questioned, which may pose a future threat to the participation of South African financial institutions in the global financial system and increases the likelihood of secondary sanctions being imposed on South Africa,” the SARB said.
The daily investor reported that since Ramaphosa took over as president in February 2018, the currency has lost 41% of its value, equivalent to an annualised compounded decline of 10%.
Chris Harmse, the consulting economist of Sequoia Capital Management, wrote in his weekly column for Business Report, Markets on Monday: “The main concern weighing hard on the currency is if the US also increase rates at their next meeting that will be held on June 13 and 14.”
BUSINESS REPORT