South Africa again largest Economy in Africa

It hardly made the news as political and economic indifference seems to be today’s way of life in this beautiful country. It could be seen during the local elections, it can be seen when young families buy groceries on budget or the latest Monster Bakkie at R 5 999 per month (not caring about 13% deposit and a balloon payment of R 170 000 at the and of the contract), meaning over 6 years they have actually paid double what the car was worth. The news was about South Africa being back as largest economy in Africa.

How did this happen at a retracting economy with currently minus 0.2% “growth”? Well it actually did not happen and Nigeria and Egypt still show growth, although minimalistic. It happens because of the exchange rate between the US Dollar and the South African Rand. The rankings are monitored and published by Americans and they do not know anything else, but their fake green-back´, actually a currency without any real inner value. If one followed the exchange rate between both currencies over the last four weeks, one could see the rand strengthened as investors continued their hunt for better returns in high-yielding emerging markets.

The rand was also set for a fourth weekly advance against Britain’s pound, the longest stretch since the four weeks to April 10, and poised for the biggest gain against sterling since the first week of July. The rand is also in its fourth weekly gain against the euro. The rand is the best performer against the dollar among emerging markets this week behind the Colombian and Mexican pesos.

The UK vote to quit the European Union has bolstered expectations that the US Federal Reserve will delay raising interest rates, as policy makers globally try to stem fall out from Britain’s decision. A gauge of emerging-market currencies headed for its third week of advances as dovish central bank policy from Japan to the Bank of England encourages investors to look toward riskier but higher-yielding emerging markets such as South Africa.

Late morning today the rand was 0.3% stronger against the dollar, taking the week’s gain to 2.1% and making the currency the second-best performer in the world this year (we deliberately do not mention how many times in the recent months the rand was the worst performer world-wide!). While government bonds retreated after four days of gains, they are still set to rise for a third week.

So, great, we are number one … on paper, but that does not change the fact that our economy continues to shrink. Did you hear the chuckle? We sure know, who THAT is!

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