Taking a pounding
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.