Torrid time for the rand

The rand has been caught in a brutal combination of dependence on weak European markets, exposure to slowing emerging markets, domestic turmoil and tighter US monetary policy.

The US Federal Reserve's announcement on May 22 that it would eventually ease off its stimulus programme was another blow to the currency.

The rand and other emerging market currencies have had a torrid time of late.

In January the rand stood at 8.75 to the dollar.

On Thursday it hit a four-year low of 10.44, with little sign of the increase in exports that might be expected with a weaker currency.

"Since the beginning of the year, the rand - like the real of Brazil and the rupee of India - has depreciated by about 17%," said Daniel Makina, a professor at the University of South Africa.

"Funds are flying back to the United States," he said.

And the slowing of Chinese growth has been another kick in the teeth for resources exporters.

South Africa's worries were made plain when Finance Minister Pravin Gordhan in June urged the US to use caution.

"Manage your internal affairs and global affairs in a responsible way so that the negative effects on our economies are not as serious as they would seem," Gordhan warned - in vain.

In South Africa credit has dried up and imports - though now more expensive - have continued to flood into the country.

Higher petrol prices have forced consumer inflation above the central bank's upper limit of 6%.

Coupled with slow growth, all this could lead to stagflation.

South Africa's economy is expected to grow at only around 2% this year, compared with 8% forecast for neighbouring Mozambique.

One destabilising factor has been continuous labour unrest.

Despite disputes often turning violent, the ANC - which is is in an alliance with trade union federation Cosatu - has often appeared incapable of intervening.

"There are also domestic reasons for the rand taking a knock," said Nedbank economist Busisiwe Radebe.

"The automotive and mining sectors, and some others, are going through [tough] negotiations and there might be turbulence due to that."

About 30000 automotive workers have been on strike since last week, crippling domestic production, and employees in the construction industry are expected to down tools from today.

They are likely to be followed by workers in mining and textiles.

Strikes are particularly common at this time of the year, when the annual wage negotiations take place.

The weak economy and the tensions brought to the boil - and continuing to simmer - by the strike last year at Marikana platinum mine, in which 34 strikers were shot dead by the police, has made investors extremely jittery.

"A lack of agreement in wage negotiations in the mining sector might have once again unnerved investors," said Shilan Shah, an economist at Capital Economics.

The outlook for the rand is poor-to-uncertain.

"The prospects of the rand will be determined mainly by the outcome of the election in April," said Nedbank's Radebe.