Lessons to Be Learnt From the Weakening Rand

Over the last few weeks the South African currency plummeted to levels last seen in 2009, and according to analysts the local currency is weakening because of the manner in which South Africa is being viewed by investors.

If the Rand’s plunge is sentiment – driven then it would be safe to say the currency is suffering as a result of negative perceptions around South Africa. A few events have cast a dark cloud over South Africa’s brand persona over the last few months, but none is comparable to the wildcat strikes that unnerved the country in 2012 and destabilised the mining sector – a large contributor to South Africa’s GDP.

Rating agencies have also not been cordial in their assessment of South Africa, citing social and developmental challenges, the agencies insisted they would keep South Africa’s outlook negative for now and there’s a probability of another downgrade in two years. The Treasury disputed the verdict of the agencies, stating they had ignored positive developments in South Africa’s economy over the last six months.

So essentially the world is starting to doubt if South Africa is a good place to invest, based on the way the country is being perceived – lacklustre reputation management on our part. Influential people who take to the podium to make potentially damaging statements must realise that what they say in public, merited or not, generally determines the mood of media headlines.

Not many will remember Sebastián Piñera; he’s the Chilean president who never missed the chance to grace the media with his presence following a 2010 mine accident which left in 33 miners trapped underground for 70 days (just over two months). Chilean officials took it upon themselves to keep the world informed about the incident and what was being done to keep the situation under control. For two months, the message was constant and backed up with new information as fresh details emerged. In the end it was about the lives of the miners that had been saved and everyone in Chile emerged as heroes. Not once were there fiery exchanges between the government and the concerned mining company, because if there were the media would have made a meal of such a development.

Imagine a similar incident happening in South Africa and make a safe bet in terms of how the situation would be handled, purely from public utterances made by people in various sectors of society, especially the highly esteemed and power wielders.

Some of the setbacks that have impacted negatively on the South African economy are purely based on what people say and this unfortunately dictates how we are seen. A recent study conducted by a global reputable audit firm rated South Africa very poorly with regards to policy certainty in the mining sector; citing confusion over the nationalisation policy was cause for concern.

Broadly speaking, currency performance is determined by various micro and macroeconomic factors, but in South Africa an extra layer is added because we never seem to be aware that the world is watching and making decisions about the country.
Written by Dumezulu Maphophe

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