Recent data has revealed that the South African rand has sunk to a new low versus the U.S. dollar this year. The exchange rate of the local currency unit against the greenback dropped to 18.636 units per dollar on March 7, 2023. This is due to the country’s electricity woes as well as its addition to the Financial Action Task Force (FATF) greylist.
10-Hour Power Outages
The South African rand has been on a downward trend since it soared to its best performance of 16.721 per dollar on Jan. 12, 2023. The currency has since depreciated by approximately 10%, making it one of the worst-performing African currencies so far this year.
Reports indicate that the rand’s slide is due to the nation’s recurring power outages. Many homes and businesses have gone for more than 10 hours without electricity, prompting South African president Cyril Ramaphosa to appoint the country’s first minister of electricity.
The new minister, Kgosientsho Ramokgopa, is expected to facilitate the coordination of the numerous departments and entities involved in finding a solution to the crisis. In addition, president Ramaphosa has urged the minister to work with the Eskom leadership to turn around the performance of existing power stations and to speed up the procurement of new generation capacity.
Meanwhile, some commentators believe that the addition of South Africa to the FATF greylist could be one of the reasons why the rand has underperformed against other major global currencies. At the time of writing, the rate stands at just under 18.6 units per dollar.
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