There has been a lot of talk about a weakened rand recently. Many factors can influence a currency’s pricing and market perception. Economists at Nedbank foresee a weak rand for the remainder of 2022. According to Nedbank, the US Federal Reserve’s decision to increase interest rates will strengthen the dollar, whilst further weakening the rand.

What Does This Mean?

This will place a further financial strain on South African citizens. Since most of South Africa’s commodities are exported, Nedbank expects a further decline in the global demand for South Africa’s resources. The effects of the deflating rand will most likely place our citizens in a tougher financial position. 

With this in mind, The Reserve Bank has to adjust its monetary policy to try and accommodate for the deflating rand. The increase in food prices and the rising amount of debt are not uncommon factors for developing countries. For South African consumers, this means an increase in the cost of living, while wages remain the same. Many turn to easy-access debt to fund their monthly shortfalls.

Nedbank foresees a further decline in the third quarter. It is possible the rand would reach R16.18 by the end of 2022.

The bank goes on to highlight that there are foreseeable downsides? risks when it comes to SOEs (state-owned enterprises.) This includes a looming higher budgeted increase in public sphere wage bills and a possible extension of further reliefs to state-owned enterprises.

Why Should You Care If The Rand Gets Weaker?

For South Africa, a deflating rand means higher prices for a number of goods that are imported. Including higher costs of imported goods that could further raise inflation.

According to the head of MANCOSA Business Nexus Unit, a lower rand is of real concern.  We have lived through a period of weak currency in the past and the impact was that of national strife. Further resulting in a slow-down in almost all sectors.  The period thereafter was one of growth and expansion. If this is to be the worst move of the currency, then the pain that we experience may be short-lived before the dawn of an economic up-turn.

Why Are We Concerned About This? 

At Vantage, we care about how the current economic climate, finance policies and trending consumer behaviour. So far, it seems to be a tough financial year for South African consumers and our government. The increased debt burden continues to rise as the cost of living reaches an all-time high. 

With the rand predicted to weaken for the remainder of 2022, this leaves South Africans wondering if they will be able to maintain the cost of living in the near future. The deflating rand further adds to the financial worries of many South Africans. If you are concerned about managing your debt, rest assured that you are not alone. Reach out to us so we can discuss which financial solution works best for you.

Sources: BusinessTech,  South African Reserve Bank, Mancosa