• Home
  • Blog
  • Community
  • Knowledge
  • Cover Stories
  • Startup Stories
  • Playbooks
  • Podcasts
  • Português
    • Events Homepage & Booking
    • Start-Up Night Africa Series
    • Lioness Lean In Series
    • Lionesses of Africa Annual Conference
    • Harvard University / Lionesses of Africa Conference
    • Young Lioness Lean In Series
    • About Us
    • Impact Partners
    • Contributor Team
    • Contact
    • Join the Community
    • Signup for FREE Newsletters
    • Share Your Startup Story
    • Share Your Lioness Launch
    • Share Your Lioness Co-Lab
    • Become a Contributor
    • Nominate to '100 Lionessess'
    • Become an Impact Partner
    • Contact LoA
Menu

Lionesses of Africa

276 5th Avenue
New York, NY, 10001
(212) 634-4540
The Pride of Africa's Women Entrepreneurs

the pride of Africa's women entrepreneurs

Lionesses of Africa

  • Home
  • Blog
  • Community
  • Knowledge
  • Cover Stories
  • Startup Stories
  • Playbooks
  • Podcasts
  • Português
  • Events +
    • Events Homepage & Booking
    • Start-Up Night Africa Series
    • Lioness Lean In Series
    • Lionesses of Africa Annual Conference
    • Harvard University / Lionesses of Africa Conference
    • Young Lioness Lean In Series
  • About +
    • About Us
    • Impact Partners
    • Contributor Team
    • Contact
  • Connect +
    • Join the Community
    • Signup for FREE Newsletters
    • Share Your Startup Story
    • Share Your Lioness Launch
    • Share Your Lioness Co-Lab
    • Become a Contributor
    • Nominate to '100 Lionessess'
    • Become an Impact Partner
    • Contact LoA

What is the expected future value of the Rand in 2020?

May 21, 2020 Melanie Hawken
pablo-48.png

Impact Partner Content: Absa / by Michael Keenan, Peter Worthington & Wessel Lemmer

Farmers’ expertise lies in the production of agricultural commodities, but the exchange rate is critical to farmers’ profitability. South Africa has one of the most volatile exchange rates in the world, for a complicated variety of reasons, which adds to the risk faced by agricultural producers in South Africa’s risky environmental situation, with unpredictable rainfall. Absa’s expertise in financial markets can help agricultural producers to manage their foreign exchange risks to the benefit of their bottom line.

The rand has weakened by 28% against the US dollar this year, hitting a peak of R19.35 per USD at the start of April, before rallying somewhat to R18.45 per USD today. This rand weakness has come on the back of heightened global risk aversion associated with the Covid-19 pandemic. As well as substantial outflows from the South African bond and equity markets, with bond outflows due in part to South Africa’s sovereign credit rating downgrades from both Moody’s and Fitch and SA’s exclusion from the World Government Bond Index (WGBI).

However, we expect the rand to recover in the latter half of the year for the following reasons, assuming that South Africa is able to get on top of the COVID-19 pandemic and to some extent reboot its economy after the lockdown measures: 

Capital inflows

A number of local asset managers are above their prudential offshore investment allowances as a result of this year’s rand weakness and a likely sharper sell-off of domestic markets compared to international markets, and their consequent need to repatriate some of their offshore investments over the coming months 

Valuations 

We believe that from a purchasing power parity perspective the trade-weighted rand is currently 17% undervalued, while our peer model (which calculates the implied fair value of the rand based on other high-yielding and commodity-based currencies) suggests that the rand should currently be trading at R16.98/USD.

Current account balance

We expect the current account deficit to narrow significantly this year due to improvements in South Africa’s terms-of-trade improvements (essentially the price of its exports versus that of its imports), reduced dividend and interest payments abroad, and import compression due to the weak economy.  The slump in the oil price as well as strong precious metal prices underpin sharply better terms of trade over the last year, while aggressive net sales of South African bonds and equities in recent quarters ought to lower coupon and dividend commitments to offshore investors. Absa now forecasts a current account surplus in the first quarter – the first since 2003, and a deficit of just 0.9% for 2020 as a whole.  A smaller current account deficit reduces the need for a more competitive exchange rate.  .

Carry trade

We believe the South African Reserve Bank is unlikely to cut policy rates to the extent that is currently been priced into the market, which together with a reduction in global volatility levels should enhance the rand’s carry trade appeal.

Given the above reasons Absa forecast the Rand to be R18.00 to the USA-$ at mid-year by end of June and by the end of 2020 at R16.40.

Risks to our view

Firstly, global investors are generally risk averse.  Any fresh wave of global risk aversion due to the heightened USA / China trade war tensions or Covid-19 related fears could keep the Rand weaker for longer. For instance, the Trump administration may want to retaliate against China in response to the global pandemic outbreak that originates in the city of Wuhan.  One way of accomplishing this is to increase tariffs on Chinese imports to the USA even more.

Secondly, with the South African government aiming to borrow up to $4.2bn from the IMF and $1bn from the New Development Bank, the rand could begin to recover more quickly than we expect if these loan deals are quickly agreed and the National Treasury converts this multilateral funding into rand in the next couple of months. 

Recommendation

Due to our open economy, the value of the Rand plays a very important part in the returns a producer realizes by the end of the export season.  It is not only true for producers that export.  The value of the Rand determines the majority of our local agricultural product prices, not to mention the prices of production inputs.  The successful management of a producer’s forex account and exposure to volatile exchange rates can optimize his efforts to limit income risk and to earn what he deserves for his effort to ensure food security to the nation.  Producers may need to talk to their financiers on a more frequent basis and get the necessary forex support to optimize their profits.

Source: Absa Research and Agribusiness

AbsaSME_728x90-Static.jpg
In Lioness Content Lab, Business Unusual Tags Absa, BU Finances
← Entrepreneur Advice from Tapiwa Matsinde / Let your creativity flow5 things I'm currently doing to keep my anxiety in check →

CELEBRATING 10 YEARS


LATEST PODCAST

LIONESSES OF AFRICA · AI Series Ep. 2 : AI-Human Collaboration in the Workplace

Lioness Radio Show: AI Series Ep. 2 : AI-Human Collaboration in the Workplace - Tune in for an engaging conversation designed to equip you with the knowledge to embrace AI and unlock its possibilities for your business.


LIONESS WEEKENDER COVER STORIES

LIONESS WEEKENDER COVER STORY
Retang Phaahla, a pioneer for South Africa’s indigenous teas
Retang Phaahla, a pioneer for South Africa’s indigenous teas
Dr Margaret Kemigisha, a publishing entrepreneur passionate about childrens’ literacy
Dr Margaret Kemigisha, a publishing entrepreneur passionate about childrens’ literacy
Sydelle Willow Smith, a pioneer of solar-powered mobile cinema in Africa
Sydelle Willow Smith, a pioneer of solar-powered mobile cinema in Africa
Babette Kourelos, a passionate artisanal bread-baking business builder
Babette Kourelos, a passionate artisanal bread-baking business builder
Thandekile Moloko, an entrepreneur empowering her clients’ financial futures
Thandekile Moloko, an entrepreneur empowering her clients’ financial futures

IMAGE OF THE DAY. CELEBRATING WOMAN MADE IN AFRICA.

Image of the Day / Oryx Desert Salt

Sustainable salt and pepper…At Lionesses of Africa, we are passionate about supporting  sustainable brands, and a great example is Oryx Desert Salt, founded by Samantha Skyring in South Africa. This growing
Image of the Day / Reform Studio

Sustainable fashion accessories…We love showcasing women business innovators, so this morning we are featuring the work of sustainable lifestyle brand, Reform Studio, an inspirational eco-focused manufacturing
Image of the Day /Femi Handbags

Full Bloom Style…Add a touch of summer florals to your wardrobe with one of the beautiful new Bloom handbags from Femi Handbags in Nigeria, founded by Femi Olayebi. With their eclectic pops of colour, there&rsq
Image of the Day / Melvins Teas

Time for tea…If you love tea, then this Cool Chamomile tea from the Melvins Tea brand, founded by Flora Mutahi in Kenya is just what you need. The brand is part of Melvin Marsh International, the Kenyan-based f
Image of the Day / Afropian

Storytelling through accessories…Afropian, the Pan-african lifestyle brand founded by Ethiopean entrepreneur Hortense Mbea, is a rare, fully hand-made in Africa brand. It uses traditional know-how in a modern way t
Image of the Day / AAKS

Vibrant Ghanaian craftsmanship,…We just have to share one of our favourite accessories of the year, this beautiful hand-woven bag created by award-winning designer Akosua Afriyie-Kumi and her AAKS brand in Ghana. We lo
Image of the Day / Ledikana

Contemporary South African Chic…Knowing exactly how to spot a gap in the marketplace is key to the success of any fashion brand, and Mapholo Ratau, founder of Ledikana in South Africa, has achieved that goal. For h
Image of the Day / The 1964 Brand

Modern relaxed fashion…Olakunmi Oni is the founder of The 1964 Brand in Nigeria, a fashion business that proudly promotes self-care through minimalist clothing for the modern woman. Loyal patrons of The 1964
Image of the Day / Adèle Dejak

Big bold accessories…We are big fans of luxury jewellery and accessories made with love and passion on the African continent, and Adèle Dejak in Kenya is the epitome of handmade luxury. The brand c
Image of the Day / ReelFruit
 
Healthy snack treats…We love showcasing Africa’s women agribusiness builders, and ReelFruit, founded by Affiong Williams, is inspirational - it’s the largest fruit processing, packaging and distributi
Image of the Day / Oryx Desert Salt

Sustainable salt and pepper…At Lionesses of Africa, we are passionate about supporting  sustainable brands, and a great example is Oryx Desert Salt, founded by Samantha Skyring in South Africa. This growing Image of the Day / Reform Studio

Sustainable fashion accessories…We love showcasing women business innovators, so this morning we are featuring the work of sustainable lifestyle brand, Reform Studio, an inspirational eco-focused manufacturing Image of the Day /Femi Handbags

Full Bloom Style…Add a touch of summer florals to your wardrobe with one of the beautiful new Bloom handbags from Femi Handbags in Nigeria, founded by Femi Olayebi. With their eclectic pops of colour, there&rsq Image of the Day / Melvins Teas

Time for tea…If you love tea, then this Cool Chamomile tea from the Melvins Tea brand, founded by Flora Mutahi in Kenya is just what you need. The brand is part of Melvin Marsh International, the Kenyan-based f Image of the Day / Afropian

Storytelling through accessories…Afropian, the Pan-african lifestyle brand founded by Ethiopean entrepreneur Hortense Mbea, is a rare, fully hand-made in Africa brand. It uses traditional know-how in a modern way t Image of the Day / AAKS

Vibrant Ghanaian craftsmanship,…We just have to share one of our favourite accessories of the year, this beautiful hand-woven bag created by award-winning designer Akosua Afriyie-Kumi and her AAKS brand in Ghana. We lo Image of the Day / Ledikana

Contemporary South African Chic…Knowing exactly how to spot a gap in the marketplace is key to the success of any fashion brand, and Mapholo Ratau, founder of Ledikana in South Africa, has achieved that goal. For h Image of the Day / The 1964 Brand

Modern relaxed fashion…Olakunmi Oni is the founder of The 1964 Brand in Nigeria, a fashion business that proudly promotes self-care through minimalist clothing for the modern woman. Loyal patrons of The 1964 Image of the Day / Adèle Dejak

Big bold accessories…We are big fans of luxury jewellery and accessories made with love and passion on the African continent, and Adèle Dejak in Kenya is the epitome of handmade luxury. The brand c Image of the Day / ReelFruit
 
Healthy snack treats…We love showcasing Africa’s women agribusiness builders, and ReelFruit, founded by Affiong Williams, is inspirational - it’s the largest fruit processing, packaging and distributi

STARTUP STORIES. MEET THE WOMEN WHO’VE LAUNCHED.

Featured
Gladys Kgorane, an entrepreneur creating special events and wellness retreats for those looking for rest and relaxation
Gladys Kgorane, an entrepreneur creating special events and wellness retreats for those looking for rest and relaxation
Drienie Botes, an entrepreneur empowering women to achieve economic independence through beekeeping
Drienie Botes, an entrepreneur empowering women to achieve economic independence through beekeeping
Tumelo Tshwagong, a South African agri-entrepreneur contributing to finding sustainable local solutions to addressing food insecurity
Tumelo Tshwagong, a South African agri-entrepreneur contributing to finding sustainable local solutions to addressing food insecurity
Gloria Sellwane Phala, a South African entrepreneur helping clients benefit from the transformative impact of yoga
Gloria Sellwane Phala, a South African entrepreneur helping clients benefit from the transformative impact of yoga
Nondumiso Leshaba, a South African business builder providing professional business advisory and accounting services to SMEs
Nondumiso Leshaba, a South African business builder providing professional business advisory and accounting services to SMEs

LIONESS DATA & INSIGHTS


LIONESS PLAYBOOKS



Screen Shot 2020-01-27 at 6.01.32 PM.png
Screen Shot 2020-01-27 at 5.34.58 PM.png

Sign up today to receive the #1-rated newsletters for Africa's women entrepreneurs.

* indicates required
Required: Please select your newsletter(s):


LIONESS BOOK REVIEWS

Featured
Women Entrepreneurs Rewired To Rise: Powerful Habits that Break Through Burnout, Silence Your Inner Critic, and Build a Thriving Business from the Inside Out  by Fiona Soutter
Women Entrepreneurs Rewired To Rise: Powerful Habits that Break Through Burnout, Silence Your Inner Critic, and Build a Thriving Business from the Inside Out by Fiona Soutter
Dream Big and Win: Translating Passion into Purpose and Creating a Billion-Dollar Business by Liz Elting
Dream Big and Win: Translating Passion into Purpose and Creating a Billion-Dollar Business by Liz Elting
After the Idea: What It Really Takes to Create and Scale a Startup by Julia Austin
After the Idea: What It Really Takes to Create and Scale a Startup by Julia Austin
Feminine Intelligence: How visionary leaders can reshape business for good by Elina Teboul
Feminine Intelligence: How visionary leaders can reshape business for good by Elina Teboul
Bridging the Confidence Gap: How Empowered Women Change the World by Sheena Yap Chan
Bridging the Confidence Gap: How Empowered Women Change the World by Sheena Yap Chan

About Us  |  Contact Us  | PRIVACY POLICY | terms OF SERVICE  | Community Guidelines  

© 2025 LIONESSES OF AFRICA public benefit corporation. ALL RIGHTS RESERVED.