The Rand and the Ripple Effect
The South African Rand made quite a nose dive this week when it hit the lowest point in thirteen years. This made investors and economists quite jittery, not to mention the poor souls in the clutches of debt. Who can afford such bad economic times these days anyway? The weak currency has a tremendously wide ripple effect, affecting almost everything in a negative manner. The Rand gets influenced by so many external factors in turn, of which most are foreign influences.
The Good, The Bad and The Ugly
Inflation-Hike (The Ugly):
The weaker the Rand gets, the higher the inflation rate. Anything above 3 to 4 % of the annual range of inflation is considered as high. A skyrocketing inflation rate would have dire economical consequences! Here are a few general concerns:
– Rising inflation results in lowering of income, especially for those already facing pay freezes and -cuts.
– General living costs will rise as the prices of necessities such as food and municipal utilities like water and electricity rise, along with everything else. Usually the elderly and lower income families are the ones suffering the most. In general, everybody is getting poorer bit by bit.
– People living from the interest on their investments will also get poorer if the inflation rate should go higher than their interest rates.
– There is a general uncertainty and lack of business confidence as businesses find it difficult to establish their costs and prices.
– With a weaker Rand value, crude oil will be much more expensive, resulting in higher fuel prices. That in turn will cause rising in consumer prices and directly a higher inflation rate. It’s a vicious cycle, really, which will hopefully be turned around soon enough.
Interest Rates (The Bad):
Interest rates naturally go up when the Rand looses value. The reason for this being financial markets protecting themselves. For those fortunate South Africans with investments and more savings than debt, this is good news of course. Sadly, for most, too high interest rates paint a darker future. Mortgages and borrowing money are getting less affordable, while most cannot afford to buy a house or car for instance without a loan.
The Flip Side (The Good):
This might all seem pretty overwhelming, but our country was in worst situations before. We always somehow managed to get through it in the end. While we cannot do anything about foreign affairs influencing our economy, we can at least take care of our own affairs. There are so many inspiring stories of individuals who managed to claw their way out of debt in the worst economical times and situations. There are just as much help around to teach us how to take care of our own economy. Worrying about the weakening Rand or the global economy won’t change a thing. We might as well take charge of what we can.
Author: Maritha Koortzen
The author writes to various websites and newspapers mostly on Health and Social Issues. She also talks at Ladies Events about Health and Wellness.
Feel free to contact her for any free lance writing.