South Africa’s currency, the rand, has plummeted to an all-time low, causing widespread concern among investors and experts.
Reuters reported that the rand dropped by as much as 2.4 percent to 19.3413 on Thursday, marking one of the worst performances in the developing world this year. The decline comes as the nation grapples with a series of challenges, ranging from allegations of supplying weapons to Russia, energy shortages, and China’s economic fluctuations.
Recent allegations of South Africa — the country has declared its neutrality on the Ukraine conflict — providing weapons and ammunition to Russia have added a new layer of geopolitical uncertainty, further shaking investor confidence in the rand’s stability. However, the currency’s downward trajectory predates the recent allegations.
The nation’s exports have been hit by the economic slowdown in China, while frequent power outages pose a serious threat to future economic growth. Both factors, coupled with the recent allegations, have intensified the overall risk factors associated with the South African rand.
President Cyril Ramaphosa’s relative absence has also had a bearing on the rand. “For many, the fortunes of the rand are becoming more overtly entwined with the political prospects of the African National Congress,” Bloomberg quoted Robert Hoodless, an analyst at InTouch Capital Markets, as saying.
The consequences of the rand’s decline could be seen across the country’s financial landscape. South Africa’s benchmark index on Thursday experienced a third consecutive day of decline, heading towards its lowest close in over a month.
South Africa’s currency bonds are among the worst-performing emerging-market securities, with the yield on government debt due in 2032 rising 0.33 percent to reach 11.6 percent on Thursday. With investor sentiment weakening under the current circumstances, experts have raised doubts about the rand’s ability to rebound.
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