Tak­ing a pound­ing

Finweek English Edition - - Economic Trends & Analysis - HOWARD PREECE

FEW SOUTH AFRICANS are re­motely aware that the Bri­tish pound has, over the past 12 months, suf­fered its big­gest fall in over­all for­eign ex­change value in more than 40 years. That’s be­cause the rand has crashed even fur­ther and faster. That lat­ter fact makes it ap­pear, su­per­fi­cially in SA, that ster­ling is buoy­ant.

The SA Re­serve Bank says in 2007 the av­er­age yearly pound/rand rate was £1/ R14,11. In first half 2008 the rand de­pre­ci­ated, er­rat­i­cally, to a rate slightly worse – that is, more than £1/R15. Un­der­stand­ably, lit­tle no­tice was taken of that. In­deed, it was rea­son­ably seen as good news for SA. That’s be­cause most economists were ar­gu­ing the case for a weaker rand to help al­le­vi­ate the se­vere pres­sures on this coun­try’s cur­rent ac­count of the bal­ance of pay­ments.

How­ever, over the past cou­ple of months the rate has slid sig­nif­i­cantly, broadly to £1/R16-R18.

But that also raised few con­cerns. Af­ter all, the av­er­age ster­ling/rand fig­ure in SA’s cur­rency cri­sis from late 2001 into 2002 was close to £1/R16 – and at the bot­tom it even briefly edged worse than £1/R20.

But the cur­rent sharp rand weak­ness dis­guises in SA – though not, of course, in Bri­tain – the huge slump in the all-in value of the pound. Ac­cord­ing to fig­ures in The Econ­o­mist, the pound is now 25% down on its Septem­ber 2007 worth against the US dol­lar.

Ster­ling has lost much the same against the Euro­pean Union’s euro.

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