Rand’s Lowest Point This Year came Unexpectedly into South Africa’s Extreme Lockdown

Local unit weakened to R19.08/dollar on 6 April 2020. After its rapid decline to that level, it spent the next six months in a ‘generally strengthening’ trend, although experiencing set-backs along the way. By 18 September, the rand had clawed back over 15% of its value to reach R16.13/dollar. This was still some way off the R13.99/dollar level at which the rand kicked off the year. And while the timing of the rand’s recovery mirrors the country’s lockdown, it’s important to realise that the two are not connected.

Extreme restrictions – which initially limited the manufacture and sale of anything beyond the barest of essential items – had a hugely deleterious impact on an economy which was already in a recession going into the lockdown. South African economy suffered untold damage with estimates for 2020 growth now ranging from a contraction of 8% all the way to 12%, while the global lockdown measures and risk factors weigh heavily on the local currency. This is an economy in dire need of stimulation, a mechanism which aims to grow the demand for goods and services and through creating additional jobs, higher incomes and additional tax revenue for government.

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