It is often said that a currency is a country’s share price: a reflection of its economic performance and investor sentiment on its prospects. Using such a measure would signal that hardly anything changed in South Africa in the decade that I was away.
At more than R17.50 to the pound, the rand is nearly 25% weaker than the levels it was trading at in April 2007, which doesn’t sound too unreasonable, given inflation differentials and other economic differences between the countries.
But that would be misleading, and a chart of the currency during that period shows a far more complicated picture, with periods of extreme optimism in 2010 when it strengthened to about R10, and the opposite in early 2016, when a toxic mix of turmoil in China, a stock-market crash, and tales of mismanagement and corruption locally sent it crashing all down to about R26, meaning a South African traveller in London would have to fork out well north of R100 for pint of warm beer.
In so far as the theory that a currency is a barometer of perceptions of a country’s prospects goes, the rand would seem to have been a fairly accurate reflection of the instability of that era.
Since Cyril Ramaphosa took over as president, the currency has largely been stable, trading in a range of about R16 to R18 to the pound, probably helped by the UK’s own governance challenges, otherwise known as the self-imposed mess that is Brexit.
In so far as the theory that a currency is a barometer of perceptions of a country’s prospects goes, the rand would seem to have been a fairly accurate reflection of the instability of the Zuma era
Notwithstanding debates about land expropriation and infighting within the ANC, investors are probably correct in pricing in a less destructive policy environment playing havoc with their investments. You can go on holiday and not worry about having to check your portfolio every day.
The years when politics was the main driver of performance meant investors got complacent about the dangers from within.
It’s ironic that the Steinhoff accounting scandal — which eventually saw the share price slump more than 90% — cost investors, from Christo Wiese to workers exposed via their pensions, billions. Up to this point, the government and state-owned enterprises were seen as the main, if not the only, source of corruption. Steinhoff has put an end to that thinking, highlighting how corporate wrongdoing is just as likely to hit your pension pot as is a corrupt politician.
The Steinhoff saga has been so toxic it has contaminated the reputation of Stellenbosch. That hit home during a conversation with a company representative who had what I thought was disproportionate response to my (mistaken) belief that the company concerned was based in the town — normally associated with higher education and wine drinking rather than seen as a den of corruption.