The news about the rand’s strength this week, which saw the currency breaching R16 against US dollar for the first time since 2022, is a significant milestone that offers a glimmer of hope for our economy. The good news for consumers is that economists are forecasting even further moves down towards R15.50/$. This positive development will bring much-needed relief to hard-pressed consumers, especially with the fuel and food costs.
A decrease in the price of fuel, for example, can have far-reaching implications, including reducing transport costs for workers’ travel to work daily, and thus easing the overall cost of living for consumers. Although others have cautioned that this could hurt exports and pose a risk to job creation in key sectors of the economy, this development could also save the government billions in debt servicing and help the government balance its books better to tackle pressing challenges. In fact, the news could not have come at a better time with finance minister Enoch Godongwana expected to deliver his budget speech next month.
The performance of the rand against the US dollar will certainly raise expectations of bold moves by the Treasury to stimulate our economic growth, and for the government to address the unemployment crisis. In addition to this, there are expectations of lower interest rates if the rand gains can be sustained for a period. There is no doubt that if interest rates are lower, many households would benefit from reduced debts.
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So, for ordinary households, another rate cut would be a welcome relief and significantly ease the economic pressures that have been felt since the Covid-19 pandemic hit five years ago. Despite all this good news, the road to overcoming SA’s socio- economic challenges is a long and unpredictable one that cannot simply be helped by the strength of the currency alone. Complicating matters further perhaps is the fact that the good news is as a result of external shifts in global geo-politics and not from internal dynamics.
After years of sluggish economic growth and state capture and corruption, much of the economic recovery gains are directed towards rebuilding instead of expansion. The key to building on the optimism brought by the currency strength therefore, lies in sustained government’s commitment to root out corruption and ensure accountability in governance. With a stronger rand, we can be hopeful that this is a signal of a promising trajectory in the future, despite some persisting challenges.
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