Currency fluctuations – how “political” is the South African Rand?


Lehumo Sejaphala | Contributing Author | Free Market Foundation | mail me |

The fluctuations of the South African currency (the Rand) in the period leading up to the recent national and provincial elections, and during the negotiations by political parties to form a Government of National Unity (GNU), have resulted in many wild and drunken speculations – especially on social media.

Some, like our newly appointed Minister of Sports, Arts & Culture, Gayton McKenzie, and the radio personality Faith Mangope have even characterised the Rand as being “a card-carrying member of the DA” and of being “politically unreliable”. There is also a senior ANC leader who (perhaps out of sheer ignorance) once suggested that the solution to a sharp decline in the value of the Rand was to pick it up, after Fitch and S&P downgraded SA to junk status in April of 2017.

This then begs the question; to what extent is the Rand political and unreliable? Put slightly differently, is there anything sinister about the recent fluctuation in the value of the Rand?

This question may be easy to answer on social media where anything goes, but it is always a mountain to climb if the answers are sought through legal proceedings, or before a competent court of law. No regulating authority knows this better than the Competition Commission, which has on more than one occasion dragged financial institutions before the Competition Tribunal accusing them of rigging and manipulating the Rand but nevertheless failed to prove it.

It is also appropriate to mention at this point that the wild speculations about Rand manipulation are nothing new in South Africa. Take for example the appointment by former President Thabo Mbeki of the Commission of Inquiry into the Rapid Depreciation of the Exchange Rate of the Rand and Related Matters (the Rand Commission), to investigate the causes of the rapid depreciation of the Rand in late 2001.

Despite the sharp decline in the Rand’s value against other major currencies – which had significant economic repercussions – including increased inflationary pressures, higher import costs, and potential harm to investor confidence and economic stability – the Rand Commission could not find any conclusive evidence of deliberate manipulation by specific individuals or entities accused. Instead, the Commission identified several market-related factors contributing to the Rand’s depreciation. These included changes in investor sentiment, global economic conditions, and currency speculation.

It goes without saying that not every decline (rapid or slow) in the value of the currency should lead to the sort of wild speculations we have seen on social media – particularly on the platform called X.

At the very risk of repeating the obvious, the strength or weakness of any nation’s fiat currency depends partially on the confidence that entities/individuals who participate in the foreign exchange market (forex) have in that nation’s political stability amongst other factors. If, for example, those market participants have high confidence in a DA-ANC GNU, they will likely purchase more rands, thus appreciating the value of our currency. Conversely, if their confidence is low due to their expectation of civil unrest, they will sell the currency, thus depreciating its value in the process. This accords with that basic economic concept of supply and demand.

Other factors which may influence the strength or weakness of the Rand against other major currencies include increased exports, service receipts, income, and financial accounts receipts inflow — all of which are likely to appreciate the value of the rand. And increased imports, payments for service, income payments and financial accounts outflows — all of which are depreciate the value of the Rand.

By way of an example, if as a result of all of South Africa’s transactions with the US in a given period the total outflow of dollars (imports, payments for service, income payments and financial accounts outflows) is greater than the inflow (exports, service receipts, income and financial accounts receipts inflow), the dollar becomes more expensive – the Rand cost of dollars rises, which means that the rand depreciates.

Anyone who says otherwise is simply peddling revolutionary snake oil and preaching dogma.

What then could be the long-term solution to the rife speculations about Rand manipulation in South Africa? I propose that the newly appointed Minister of Basic Education should consider introducing legislation that would make Economics a compulsory subject in our public schools. As recent events have shown there is a dire need for elementary economics knowledge in South Africa.


  1. Today you have enlightened me, i was trying to understand the depreciation of our currency though i didn’t have an idea but you gave me light on this issue. The article is very insightful


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