Experts are impressed at how fast our economy is bouncing back. Two developments you need to know about:
1. South Africa recorded its “highest and fastest growth level ever” in April when it grew 25.9% in real terms on a year-on-year basis, according to Beti, an index that measures South African transactions. This was off a very low base, though, as our transactions had fallen so badly with the pandemic and lockdown. So in context it’s a bit like an F student becoming a C student again, after taking a knock. But what makes it remarkable is how fast it happened. Beti credits those low, low interest rates that have you spending less on loan repayments, (explainer here) plus government spending money to get it flowing through the economy. (It’s called stimulus.)
2. This week, it cost you less than R14 to buy one dollar – for the first time since January 2020. When the pandemic hit, it would have cost you R19, so this is a GREAT recovery. A weaker rand increases the price of importing goods, which in turn increases the price we pay for them. (On the plus side it makes exporting pretty good business.) The rand, along with other emerging market currencies, is also pretty volatile, which means it’s quite responsive to market shifts and global events. Traders sell their rands when things are looking bad, but thanks to some good local developments over the past week the rand was able to gain some steam: Ramaphosa gained political support for his decision to suspend Magashule, and rating agency Moody’s decided to keep SA’s credit rating unchanged at two rungs below investment grade. (See here for our explainer on credit ratings.) It all means traders are gaining confidence in South Africa.
P.S. Nomvula Mokonyane, THAT’S how you “pick up the rand”. * drops mic *. 😉
This article appeared as part of The Wrap, 15 April 2021. Sign up to receive our weekly updates