The USD/ZAR currency pair has come in for a lot of tap in recent years, and no reversal looks likely for the immediate future. The problem with the South African Rand lies in the inherent structural weaknesses in the South African economy. For starters, the nation's parastatal electricity supplier – Eskom – routinely undertakes what is euphemistically known as ‘load shedding' to ration electricity among the country's inhabitants. Owing to a dilapidated and inadequate power sector, vast reductions to operational efficiency and productivity have finally taken their toll.
The SA economy is a labour-intensive economy; the agricultural and mining sectors comprise a major chunk of overall economic activity. This means that strikes and union matters add tremendous downward pressure to the economy. The government is locked in a perpetual struggle with the unions, adding additional stress to the ready faltering mining sector in the country. South Africa was ranked first in terms of gold production in the 1980s and 90s, but it has since dropped to 6th position on the global stage. There are many reasons for the sharp declines in South African productivity, but falling commodity prices certainly top the charts.
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SA Gold Mine Production
The problems are many, and I've specifically chosen not to address the widespread issues of crime, corruption and violence that plague the country. From a purely economic standpoint, the ZAR appears to be moribund. The last time the currency saw present levels against the USD, the GBP and other developed market currencies was back in 2001/2002. The rand recently plunged to 12.82 to the US dollar and 19.91 to the British pound. These are indeed worrying times for an emerging economy intent on avoiding the fate of its northern neighbour, Zimbabwe. It is true that the fundamentals of the SA economy differ from those of Zimbabwe, but massive unemployment, rising inflation and trends in the global market are placing the rand under tremendous pressure.