One of the most lingering aspects of travelling overseas is when the reality of just how weak the rand is hits home.
Credit: INDEPENDENT MEDIA
Nicola Mawson, IOL Business Editor. Picture: Matthews Baloyi, Independent Media.One of the most lingering aspects of travelling overseas is when the reality of just how weak the rand is hits home. It’s one thing to look up the exchange rate, and another to feel the pain of a cash withdrawal, or your credit card statement.
A trip lingers because it takes ages to clear the debt - debt that accumulated because you still have to eat, and get gifties for the peeps back home, and sight see.
Even if you went totally budget (no visiting cathedrals, no gifts, el cheapo food) you would still have a hefty amount to pay back.
Travelling to the UK exaggerates the strain on wallets because of just how badly our currency is doing against sterling.
Currently, it’s just more than R20 to a pound, but when I left almost two weeks ago, I bought forex at R24.
Eventually you stop translating prices back to rand in your head; it just gets too painful to know that the bottle of water you just bought cost you a whopping R20, and a semi-decent but not top-of-the-range sarmie was R80.
Ouch.
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Shop assistants are bemused when you say you could buy four of whatever item for the same as what you just paid for one if you were back home.
Why the rand - a volatile currency anyway - has plummeted in such a dramatic fashion has been the subject of much debate. Frankly, South Africa has been its own worst enemy with politicians making moves the rest of the world has more than frowned upon in the midst of a global emerging-market and commodities rout.
There are several ways of looking at where the rand should actually be. The most popular seems to be The Economist’s Big Mac Index, which is based on pricing parity.
I prefer the Mac index because that makes the most sense to me, as the index looks at the price of a burger in the US and then in other countries and works out what the exchange rate should be.
Not that South Africans won’t, of course, find a Big Mac costly in the US, but we do need to use something as a base point, and a Big Mac is as good as anything.
Using the index, which was initially invented by The Economist in 1986 as a light-hearted guide to whether currencies are at their “correct” level, the rand is undervalued by 64 percent and should be trading at R5.68 to the dollar instead of at R14.52.
A pound should cost you just under R10. That sounds about right, even if a sarmie is R80 and shouldn’t possibly cost R40. It sounds right because not every basket item will be so overpriced, so it will balance out.
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So, the question then becomes how to fix the currency.
I doubt there’s a simple solution because much of the weight is out of our control. There’s not much we can do about the emerging-market rout, or about commodities falling out of bed.
There is, however, much we can do to stabilise SA internally so that we lead the emerging-market pack. That will help.
That, however, requires political will and a firm commitment to fix things, as well as action. We need to walk the talk, but are not terribly good at that.
And, even if we do start fixing our internal structures, this isn’t an overnight solution.
In the meantime, we could promote SA as a stupidly cheap tourism destination, or as a cost-effective manufacturing hub.
Sadly, there are obstacles to those solutions too, such as crime, and red tape - and piles of rubbish still lining many streets that would put most off our otherwise beautiful country.
We have a lot of fixing to do if we want SA to take its rightful spot, and I suggest we really get going now.
Let’s get everyone with clever ideas together and develop a plan, and then do it: just implement.
We owe it to the children who will inherit SA.
* Nicola Mawson is the online editor of Business Report. Follow her on Twitter @NicolaMawson or Business Report @busrep.
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