In the last Insight’s I mentioned that South Africa was, temporarily, in a relatively good space amidst the current world’s economic crisis occasioned by Putin’s war in Ukraine, with many economies on the precipice of recession. Most significantly, the Rand has shown itself to be resilient, even in the face of astronomic increases in fuel prices. The reason for this, up to now, has been the increase in commodity prices (again, driven by a sanctioned Russia and a blockaded Ukraine) which makes up more than 60% of South Africa’s export values whereas fuel constitutes just over 20% of its import values. But, as I warned, this is a temporary situation since the recessionary forces at play will reduce the demand for many of South Africa’s commodities. The following future delivery prices from Investing.com reveal this only too clearly.
This will inevitably impact the Rand’s performance, particularly in the light of the most recent interest hike of 0.75% by the US Federal Reserve, although this will affect the U$/ZAR exchange rate more than the €/ZAR rate.
Despite these factors the Rand is showing exceptional resilience as the current €/ZAR graph illustrates:
This strength is not sustainable in the face of the recessionary forces at play in the major world economies.
Unify’s supply chain disruptions caused by the Ukraine war and the China Covid19 lockdowns continue and stock reserves are declining s a result thereof.
As a result the message to our partners continues to be the same – use the relatively strong Rand whilst it lasts and order stock whilst it is available.