The rand was expected to drop further in the lead-up to the holiday season, and could continue falling into next year, an economist said on Thursday.
The rand dropped this week to its lowest level in nearly four years, reaching R9 to the US dollar.
Chief economist at Standard Bank, Goolam Ballim, said the rand could weaken further in the lead-up to the end of the year and into 2013.
“There is a fear that it is likely to remain with us, and it suggests that it (the rand) is likely to be weak over the new term,” Ballim said.
He said the depreciating rand also had the potential to “stoke inflation”.
“It eventually translates into even higher electricity tariffs, tax rates and even higher prices for consumers,” Ballim said.
This meant an increase in basic prices, and a reduction in buying strength.
Ballim said this could lead to impoverishment as the poor were most likely to be affected.
The depreciated rand could also make imports “pricey” and boost exports from South Africa.
Ballim said the rand had dropped for several reasons.
“Firstly SA exports have recently waned, and this is extended alongside output losses in the mining, and recently, the farming sectors,” he said.
Downgrades by credit ratings agencies also played an important role.
“The downgrades signal that South Africa may be struggling to deal with lengthy socio-economic issues,” Ballim said. - Sapa