Speaking from Davos, where he had met “captains of industry” and was updated on global economic trends and prospects, Trade and Industry Minister Rob Davies said the weaker Rand would assist exporters and, to some extent, offset lower demand in Europe, SA’s main trading partner. A weaker Rand would further act as a barrier against what were in some cases unwanted imports, according to Davies, reports Business Day.
An unintended consequence of Davies’ weak Rand policy is that it is a key driver to the recent social unrest in South Africa.
Another consequence is that imported durable goods prices are about to climb about 10% across the board at the wholesale level. I was at Stax on the weekend and the salesman in charge of household appliances told me they’d just been given their updated cost sheets from suppliers and prices have gone up 10%-50% across the board, owing to the weak Rand.
I was at a Baby City yesterday and prices of certain prams and strollers have already increased in excess of 10% across the board in the last two weeks at the retail level. Salesman cited the weaker Rand.
Both salesmen were extremely concerned about the impact these price increases will have on sales. So while Rob Davies is cheering the fleeting profits of exporters, he’s very quiet on the declining profits of importers, and the resulting decline in purchasing power of local consumers.
Bottom line: the loose monetary policy of the SARB is fueling a credit boom, driving the Rand weaker, and is resulting in accelerating price inflation. If you’re planning to buy imported appliances, you might want to do so soon.