Currency News: South African Rand (ZAR) Takes Major Hit Over the Last Year

Currency News

South Africa’s currency dropped dramatically in the past year as the algorithm predicted, falling 31.30% since the end of March 2015. Weakened exports, political controversy and rising inflation rates have all contributed to the struggle of South Africa’s rand over the last year.

currency news

South Africa’s deficit reached 5.1% of the country’s GDP in the fourth quarter of 2015, higher than analyst projections of 4.4%. South Africa uses mostly foreign investment in stocks and bonds to help fund the deficit, but foreign income has dropped as investors have lost confidence in President Jacob Zuma’s administration.

The trade gap grew in the fourth quarter as well with the country’s exports dropping 3% and imports rising 1.1%. As of the end of the quarter, the gap had more than doubled to 57 billion rand ($3.7 billion). The depreciation of the rand boosted earnings for domestic producers that export their goods as well as tourist spending, but had more adverse effects on the economy.

Inflation rates in South Africa hit their highest level in nearly seven years, at 7% year on year in February according to Statistics South Africa. This will add pressure on the Reserve Bank to raise interest rates even further despite fairly stagnant economic growth.

Controversy surrounding a power struggle between President Zuma and Finance Minister Pravin Gordhan has only intensified the economic problems that the country is facing.  President Zuma seems to be a large part of the problem in South Africa, as he seems to be distracted from the country’s best interests by his own commercial assets and connections.


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