South African Rand hits 40 year low, concerns about downgrading to junk status

The South African Rand hit a 40 year low yesterday, it had been falling gradually but took a tumble this week. This is attributed to the poor economy among other factors. There are fears that South Africa will be downgraded which means that there will no foreign investment in the country.

Justin Chadwick Chief Executive Citrus Growers’ Association said that this was good for exporters in the short term as returns will be better but will inflate costs on imported goods such as packaging and chemicals used for growing.


Source: https://www.exchangerates.org.uk

“The indicators are that the poor state of the South African economy has been a major factor in the drop. There is only one rating agency which rates South Africa above junk status and they will reassess that in the coming days. There is a danger that if the country gets downgraded that some investors will no long be allowed to invest in South Africa. The coronavirus also having an impact on the economy and the exchange rate. At the moment there are only 5 confirmed cases, but there are a lot of vulnerable people in South Africa and it could get serious. Anyone entering the country’s airports is being tested for the virus.”

Anton Kruger Chief Executive of the Fresh Produce Exporters Forum echoed Chadwick's comments, “The current low value of the Rand is a two-edged sword. On the export site it will offset potential lower volumes but on the input side it will impact negatively - but not immediately, more on the medium to longer term.”


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