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Misanet.com / IPS, 28 January - So drastically has the South African rand fallen in the past two months, taking with it the national currencies of Swaziland and Lesotho that are linked to it, that the issue has left the realm of economics to become a political issue with troubling social consequences. - Just as a rising tide lifts all ships, a declining rand is sinking those economies tied to it, says Michael Motsa, a Swaziland investment broker. Since November, the rand has lost over 20 percent of its value, bottoming out at R13.26 to one US dollar in late December. The currency has subsequently retrieved some of its value, and now lists at R11.23 to a dollar, though this exchange rate would seem like a nightmare scenario just five years ago, when fewer than four rands could purchase a dollar. There are many reasons given by economists for the currency's fall, some having to do with politics. But as debate proliferates among government policy makers, it is the common person who is feeling the pinch. - Petrol prices are soaring, which means the price of everything else is going up, from newspapers to fruit at the market, says Sipho Dube, a bus owner at the Swaziland capital Mbabane. - Inflation is rising as an inevitable result of foreign goods purchased in hard US currency, says a Lesotho banker, who advises his government's finance ministry in Maseru, the capital, about interest rates. South African government officials initially put the best light on a downward spiral of currency value they are powerless to counter. "This will be good for exports, which will be cheaper on world markets, and thus more competitive," said finance minister Trevor Manuel last November. A flood of new tourists was also predicted, as visitors enjoyed bargain prices due to the buying power of their home currencies. But the worst thing that could happen to an economy seeking to expand struck when South Africa's interest rates shot up after the reserve bank governor said there was a need to fight inflation induced by higher import costs, particularly petroleum. Higher interest rates make it harder for businesses to borrow money to expand operations, and harder for consumers to acquire loans for new cars and houses. With less money in circulation, any economy inevitably contracts. - Ironically, a self-fulfilling prophecy has occurred, commented the Times of Swaziland. "The rand has fallen because people have no faith in the regional economies, and the fall in the rand has created conditions that hinder those economies." - What happened to all the tourists who were supposed to come, now that our countries are so cheap? asks Thandi Masuku, a waitress at Mantenga Cultural Village restaurant. The popular reconstruction of a 19th century traditional Swazi homestead has not seen the predicted influx of visitors. Nor have orders for the kingdom's exports noticeably risen, according to the Swaziland Chamber of Commerce. - This suggests there is more to our currency woes than economics, says a chamber source. Commentators in the media have stepped in where economists have feared to go, blaming South African President Thabo Mbeki's faltering political leadership, as they allege, for a lack of confidence in the region that is reflected in the currency drop. Just as South Africa is Southern Africa's dominant economy, so too do neighbouring countries look to the most populous and developed nation of the sub-continent for political leadership. - Mbeki refuses to take-on [Zimbabwe President Robert] Mugabe, and that has led to a loss in overseas confidence in the region, says a letter writer in a Maseru newspaper, who identifies herself as a businesswoman. - The Zimbabwe economy's crash was the result of Mugabe's political agenda, and by refusing to intervene, or even criticise those policies, Mbeki raises fears that the same might happen in South Africa, says the writer. "Mbeki's handling of the AIDS crisis in his country, which is damaging the economy, also does not inspire confidence." Zimbabwe is often blamed for a regional economic crisis that precipitated the rand's fall. In turn, the declining rand has hindered the economies not only of Lesotho and Swaziland, but of nations economically linked to and dependant on South Africa, particularly Namibia, Botswana and Mozambique. While South African government officials insist that the rand is undervalued, their prediction that the currency's fall will end and eventually reverse is failing to convince the region's workers, whose paycheques have less value. Property owners are seeing the worth of their investments diminishing, and consumers are paying higher prices for everything. - The rand, which is the regional currency, has been falling against the dollar for ten years, and now it is in free-fall, so why should we believe what government officials say? asks Robert McGuire, a factory manager at Swaziland's Matsapha Industrial Estate. McGuire's company, which makes auto components, has to pay more for raw materials, whose value is determined in dollars. This requires a rise in the price of the finished product, offsetting an advantage the product would have if its price remained constant, but was cheaper for overseas buyers because of the declining rand. - Everyone is hurt by a free-falling currency, and nobody is helped, says McGuire. - Prices are inflating at the same time that workers' pay in real terms is declining by a quarter, and this is a recipe for civil unrest, says Jan Sithole, Secretary General of the Swaziland Federation of Trade Unions. From market vendors to company managers, the people who are most directly affected by the rand's precipitous decline, everyone expects matters to get worse in the year ahead. - There is no confidence in a government leadership that has allowed things to get so bad, says McGuire. By James Hall,
IPS
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