• One Percent Trading Group

South Africa's current economic state and where the Rand is heading?

Updated: Aug 30

After a steady strength in the Rand, the impact of recent economic events left the Rand tumbling back down

Firstly, lockdown level-4 initiated again, as we enter the severe 3rd wave of the coronavirus pandemic directly impacting all small businesses, restaurants, schooling and local community members looking for day work, have now been brought to a halt, as added restrictions associated with lockdown causing adverse pressure to an already volatile economic state, it is however noted that it is not as severe as the impact of the first level 4 lockdown last year May, which brought the country to complete standstill.

Secondly the imprisonment of former South African president Jacob Zuma, Jacob Zuma handed himself over to the police to serve a 15-month sentence for contempt of court, just after midnight on Thursday the 15th, this lead to the unrest and violent looting and protests as many unruly citizens aiming to “claim back KZN” as advised by Zuma-faction supporters, took to the malls claiming that "hungry stomachs have no ears" Disregarding the law and the efforts to social distancing aggravating the spread of the infectious Delta variant, according to business tech website, only 2.3% of adults are fully vaccinated, by the 13th of July a total of 192,726 active cases of covid 19, 40% of those are from the Gauteng region after a week of riots and unrest which will have a critical impact on the economy that is already buckling under covid-19 Pandemic.

Research from Price Water House Cooper states that calculations show that the national GDP growth could be 0.4 percentage points lower this year, due to the last week's significant disruptions.

Given the loss of potential economic growth, it is estimated up to 50.000 jobs could be at risk.

5000 members of the SANDF (South African Defence Force) were deployed to curb the violence and restore peace in the country, taxi drivers, private security companies, and ordinary civilians stepped up to protect businesses and communities, clean-up operations are on the way, and is estimated that the total cost of damage to be more than 5 billion Rand for the retail industry alone, 15 million to damage to property.

After the tension has died down there is the call to the overnight economic and development and labour council (Nedlac) meeting, and the Congress of South Africa (Cosatu) has proposed a disaster relief package.

According to PWC, South Africa can be expected to be back to level one restrictions by September, and the easing of restrictions to begin in August, under the baseline scenario, this could be the perhaps be the hope to strengthen the Rand back up, however now the current situations cause for a fundamentally weakened rand.

USDZAR Economic Comparison - 1% Dashboard

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