Memory of its swift fall haunts a healthier rand

BOARDING a post-Women’s Day long weekend flight, I bumped into a Treasury official I recognised. “Take a Van Rooyen?” I asked brightly.

He gave me that small smile that could have meant “Oh no, not another one”, or “That’s really not funny”, or “Don’t joke about that”.

A “Van Rooyen”, for the uninitiated, is slang for “long weekend” — usually one that stretches over four days, the amount of time Des van Rooyen was finance minister before President Jacob Zuma was reluctantly forced to reappoint Pravin Gordhan in December last year.

My flying companion clearly did not want to be reminded of just how much of a mess the country was in at that moment. He smiled politely and I moved on.

This small interaction might be instructive as the ANC, smarting from losing its majority in several key municipalities, weighs up where to go next and assesses the impact of keeping Zuma as leader in the runup to the general elections in 2019.

Twelve months ago, if anyone had suggested the economic benefits of the rand at stronger than R17.50/£ or R13.50/$, they would have been scorned. This time last year the rand was already sliding. The sacking of Nhlanhla Nene on December 9 simply exacerbated the collapse.

But in recent weeks, the currency has turned. In many ways it should be more vulnerable now than it was a year ago. At least then, there was certainty about who was in charge. Now, with the ANC losing its urban dominance, there is no telling which way its policymaking will move.

Foreign investors theoretically should be spooked by the new normal. But they’re not. Instead we see the currency strengthening sharply.

Typically, South Africans — always so keen to get money out of the country at times of crisis and happily paying R25 to buy a pound as a capitulation sets in — are more reluctant to commit to externalising funds at R17.50 when the trend looks like it is strengthening.

The reality is that the currency remains volatile and that uncertainty is what causes so many investors to become paralysed by indecision.

A financial adviser I know recommends the following (assuming that, unlike most of us, you have some spare cash lying about): take out money in tranches once a quarter to diversify your domestic risk. Taking larger amounts cuts the frequency and multiple fees associated with taking money offshore. Pick a level at which you are comfortable (in his case R13.50/$ seems reasonable) and take money in blocks — three or four bigger tranches regardless of what happens to the level of the currency.

Bear in mind that the economic grass elsewhere is not necessarily greener and don’t try to secondguess the currency market. Also, no matter how convincing the sales patter, don’t fall prey to snake-oil salesmen selling software they claim will help you trade currencies like a pro. They are proliferating right now like bacteria in a petri dish.

There is a huge amount of uncertainty as central banks are continuing to effectively print money to buy corporate debt in an effort to free up capital so it can be lent to borrowers who theoretically invest that cash in productive assets allowing them to be part of a growth stimulus. Instead it ends up as hot money in an ever-tightening global financial system where a third of all sovereign debt being issued currently is on a negative yield and the outlook for the global economy steadily worsens.

It leads to an increase in speculation, hence — despite the post-election stalemates in which South African political parties found themselves — the rand enjoyed a positive run.

All of this can be turned on its head in a moment, though.

Still, why did the man from the Treasury grimace? Was it just that my “Did you take a Van Rooyen?” joke was in bad taste, or is it the ever-present fear that the events of December could all so easily happen again in a heartbeat?

Whitfield is an award-winning broadcaster, financial journalist and public speaker