Is the Rand undervalued – or just honest?
I was taking a long, well for me at least, 7km solitary walk down an isolated and beautiful empty beach earlier this morning, contemplating the rand, as one does at such moments in nature 🤣
The tide was going out, and it made me think: Is the rand doing the same? Or is it simply where it needs to be right now?
At around R18.70 to the dollar and R25 to the pound, some argue the rand is heavily undervalued. The Big Mac Index and purchasing power parity models suggest its “fair value” might actually lie somewhere between R8–R12/$.
But as we know, the currency consistently trades at a significant discount, not due to mispricing, but because of South Africa’s elevated risk premium and persistent structural issues: high debt, slow growth, and policy uncertainty.
In other words, the rand isn’t just undervalued, it’s also probably honest.
If you care deeply about the poor, as I do, you might ask: would a stronger or weaker rand serve those struggling, any better?
A stronger rand brings down the cost of fuel, food, and medicine. It stretches every rand further for low-income households. It eases survival.
But a weaker rand, when leveraged cleverly and wisely, stimulates exports, manufacturing, and tourism. These are industries that create jobs, especially for people without degrees or formal networks.
So, the answer is: both can help, and both can hurt, all depending on the policies behind them.
And growth?
Growth doesn’t come from exchange rates. It comes from:
•Policy certainty
•Investor-friendly conditions
•Efficient infrastructure
•Less red tape
•Zero tolerance for corruption
•Leadership that inspires belief
These aren’t luxuries. They’re the scaffolding for a stronger economy and a stronger rand.
We’ve become too used to asking what the rand is doing to us.
But perhaps we should be asking: What are we doing to deserve a stronger rand?
Because as economist and Professor Barry Eichengreen said, and I believe it deeply, “Currencies don’t shape countries, countries shape currencies”.
#SouthAfrica #ZAR #EconomicGrowth #Leadership #Rand #CurrencyTruths #GrowthWithIntegrity #PolicyMatters #ExchangeRates