Current conditions for South Africa’s export market and local production is ideal
South Africa’s current global export competitiveness is at an all-time peak and has been described as “unbelievable”. According to chief economist Dr. Azar Jammine, it is likely to remain so for “a good few months”.
This is a great opportunity for South African exporting companies. The current exchange rate and low inflationary rates have enabled local companies to “climb in and start producing goods that were previously imported”.
South Africa’s weakened currency (Rand) has resulted in a favourable situation for South African companies that are exporting their products to foreign markets. This is due to the country’s inflationary pressures being at an all-time low.
Theoretically, inflationary pressures would have been expected to increase due to the weakened rand. This is however not the case, mainly due to reduced economic activity following the lockdown of the nation in March 2020. As the population undergoes salary cuts, businesses are finding it difficult to implement cost increases on products.
South Africa’s U-Shaped Economy:
Due to the global Covid-19 Pandemic, South Africa’s economy is currently undergoing a U-shaped Scenario rather than the more upbeat V-shaped scenario, or worst-case L-shape scenario. It has further predicted that South Africa will continue experiencing the U-shape scenario, with economists predicting that it will remain so for the remainder of the year. During the U-shaped scenario, the South African economy is expected to contract by 6.5% in the year 2020 while economists are hopeful that the economy will undergo a recovery rate of 1% or 2% in 2021. This scenario also means that the rand should hold steady at around ZAR 17,00 – ZAR 18,00 to the dollar for quite a while.
Please do not hesitate to contact us for assistance should any of your clients be interested in taking advantage of the current situation in SA. You can do this by sending an email to charne.potgieterintergest.com.