The Guvnor
20th Dec 2001, 15:26
From today's Daily Telegraph:
[quote]Rand plunges to 5.5p but Mbeki sees no need to panic
By Tim Butcher in Johannesburg
(Filed: 20/12/2001)
THE rand dropped below 18 to the pound for the first time yesterday, continuing a decline that has seen South Africa's currency lose 40 per cent of its value this year.
After six months when the rand has performed worse against the US dollar than any other currency, confirmation of the retirement of James Cross, the reserve bank deputy governor, wiped three per cent off the value.
The currency began its latest downward spiral back in January, but the past fortnight has seen dramatic worsening as it has broken through previously unthinkable barriers. The collapse represents the most significant economic challenge to the ruling African National Congress since it took power in 1994.
The rand has replaced South Africa's crime epidemic as the topic of the moment. Newspapers have begun to chart the almost daily decline on their front pages and the topic dominates radio phone-in shows.
Newspaper columnists have criticised companies such as Old Mutual and South African Breweries which have relisted on foreign stock exchanges in recent years. They are accused of being unpatriotic for being insulated from the slide in the rand's value.
But there was no sense of panic in the government as President Mbeki said he was not too concerned about the decline and refused to enact short-term measures to shore up the rand.
Economists admitted that they were "flummoxed" as there has been no significant change in the fundamentals of the economy, with inflation and government spending under control.
One factor cited is Argentina's default on debt repayments, which caused speculators to seek other emerging markets. They have gambled huge amounts by speculating that the rand will devalue, causing strong downward pressure.
The Zimbabwean crisis has coloured long-term investors' views of the southern African region, where a functioning and self-sustained economy has been ruined by President Mugabe's clumsy attempt to cling to power.
Aids is also seen as a factor, since it could deprive South Africa's economy of millions of potential wage earners over the next 10 to 20 years.<hr></blockquote>
[quote]Rand plunges to 5.5p but Mbeki sees no need to panic
By Tim Butcher in Johannesburg
(Filed: 20/12/2001)
THE rand dropped below 18 to the pound for the first time yesterday, continuing a decline that has seen South Africa's currency lose 40 per cent of its value this year.
After six months when the rand has performed worse against the US dollar than any other currency, confirmation of the retirement of James Cross, the reserve bank deputy governor, wiped three per cent off the value.
The currency began its latest downward spiral back in January, but the past fortnight has seen dramatic worsening as it has broken through previously unthinkable barriers. The collapse represents the most significant economic challenge to the ruling African National Congress since it took power in 1994.
The rand has replaced South Africa's crime epidemic as the topic of the moment. Newspapers have begun to chart the almost daily decline on their front pages and the topic dominates radio phone-in shows.
Newspaper columnists have criticised companies such as Old Mutual and South African Breweries which have relisted on foreign stock exchanges in recent years. They are accused of being unpatriotic for being insulated from the slide in the rand's value.
But there was no sense of panic in the government as President Mbeki said he was not too concerned about the decline and refused to enact short-term measures to shore up the rand.
Economists admitted that they were "flummoxed" as there has been no significant change in the fundamentals of the economy, with inflation and government spending under control.
One factor cited is Argentina's default on debt repayments, which caused speculators to seek other emerging markets. They have gambled huge amounts by speculating that the rand will devalue, causing strong downward pressure.
The Zimbabwean crisis has coloured long-term investors' views of the southern African region, where a functioning and self-sustained economy has been ruined by President Mugabe's clumsy attempt to cling to power.
Aids is also seen as a factor, since it could deprive South Africa's economy of millions of potential wage earners over the next 10 to 20 years.<hr></blockquote>