Just to brighten up your day for all the SA doomsayers ...

The economy looks in reasonable shape it seems

Cheers, Peter
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Rand Set to Be King of Currencies This Year

Business Day (Johannesburg) January 3, 2006

THE rand is in for a rollercoaster ride this year, buoyed by expected strong precious metals prices and prospects for further foreign direct investment in SA.

Last year, the rand ended a three-year rally as the best performer among the 16 most actively traded currencies, falling 10,5% in 2005. It is trading at about R6,32 to the dollar.

However, expectations of a strong gold price and solid economic growth could help the rand reclaim its position as best performer. This would be bad news for the country's export sector, but positive for the South African economy, for inflation, as well as for the local equity market, according to analysts.

JPMorgan economist Marisa Fassler said 2006 was set to be a "rollercoaster ride for the rand, which would also largely be driven by the outlook for the dollar".

"Nevertheless, forex reserve accumulation by the Reserve Bank should help to smooth at least some of the volatility in the market," Fassler said.

Further, economic growth would accelerate this year "and beyond and this will help support the rand", said Chris Hart, a senior economist at Absa Group. Hart said recently that government's plan to boost growth could result in the rand rallying to R5,70 to the dollar by the end of the year.

A continuation of the current strong gold price is a key reason for the rand's expected strength this year. Gold traded near its highest annual close in 25 years as hedge funds and other large speculators were expected to buy more bullion to diversify their holdings. Gold ended 2005 at $517/oz, its highest since 1980.

"Expect gold to remain firm in 2006 as huge Indian and Chinese jewellery demand outstrips supply, and as the world's central banks start increasing their depleted gold resources," said Investec Asset Management director Jeremy Gardiner.

In the past three months alone, the rand gained 6% on the back of a resurgence in precious metals prices -- particularly gold and platinum. The metals account for about 20% of South African exports.

Last year the currency came under pressure from both political and monetary authorities. In June, the Congress of South African Trade Unions staged a week-long strike, in part to protest against job losses that resulted from the currency's strength. These losses have been felt largely in the mining and manufacturing sectors, which together make up about 23% of SA's gross domestic product.

The ruling African National Congress (ANC) also called for a more "competitive" exchange rate. This reflected concerns about SA's high unemployment rate which is officially estimated at about 26%, although unions say that the figure is much higher.

The production side of the economy has shed hundreds of jobs as a result of the firm local currency. "Authorities hinted at a bias for a softer rand" by cutting rates to support the manufacturing and mining industries, said Goolam Ballim, chief economist at Standard Bank.

To help the production side of the economy, the Reserve Bank has implemented seven reductions in interest rates since 2003, in the process fuelling consumer and business spending. Economic growth reached about 5% in 2005, the fastest pace in 21 years.

And while the rand was not the star performer last year, it nevertheless put in a solid performance. It received a boost when UK bank Barclays bought a 56% stake in local banking group Absa for about R28bn, resulting in the largest inflow to date of foreign direct investment.

More recently, global telecoms company Vodafone announced plans to buy a further 15% of Vodacom for as much as R16bn. This is expected to further boost the rand in 2006.

If they are predicting the Rand below 6 to the USDollar. Don't expect any cheap safaris in RSA in 2006.

In 2005 the Rand traded between about 6 and 6.75 to the USDollar.

In 2004 the Rand traded between about 5.75 and 6.95 to the USDollar.

In 2003 the Rand traded between about 6.50 and 8.70 to the USDollar.

I think I read somewhere that an ideal "exchange target" would be in the range of 7.0 - 7.5 Rand to the USDollar.

Regards,

Terry

Hi Terry

Hope all is going well in the USA despite the rather inclement weather being experienced across the nation ..

We are having very good rains in Southern Africa regions and the bushveld has spring into life and very nice and green, the baby animals are prevalent and things are boyant to a degree ..

Yes you are essentially correct, the chances of an (el cheapo safari in Africa) I believe may be a thing of the past and only in dreams as the screws go on some of the more popular hunting destination countries. Mind you the way the world is battling with problems in general I think prices are going up and up everywhere it seems

Peter

This is interesting when one reflects on the comments from the outfitters about how terible things were in 2000 thru 2002 as the rand to dollar hit the 12 to 13 range and how they were having to increase their rates to compensate for the inflation. Now the rand is stronger and I would believe inflation would be wanning and now we hear that rates will be on the increase. What is the economic theroy behind this reasoning?

It's really a supply and demand issue. More intrepid sportsmen and women headed to Africa to hunt...fewer countries available to hunt and constant changes to hunting opportunities (lions, ele, etc.) within those countries causes prices to rise.

Zim has it's problems as highlighted in other threads. South Africa is grappling with the definition of "high intensity game ranching" and "canned hunting" so the Government steps in to "clean up the industry"...whatever that may mean. Probably fewer ranches available for hunting.

Tanzania, Botswana and Zambia safari prices continue to escalate at a dizzying pace. All these things have an impact on the available hunting.

I was pricing western Africa for a possible 2007 safari and have seen prices escalating in Benin and Burkina Faso. So it is happening across Africa and just not because of forex fluctuation in the RSA. The issues are more complex than that.

I am happy to see South Africa doing well from an economic standpoint. Wish I would have invested in real estate there in the late 90's...oh well, a day late and short of vision!

Of course, the rising price of a safari might also have something to do with the ever rising price of fuel which then puts up the price of everything else, including wages, food, drink etc etc etc....

Let's face it guys, when did the price of pretty much anything go down over time..... I can't think of much offhand.

Have you ever looked at the information and communication products? Fuel has risen world wide, you know in places like Namabia and you don't see the prices escalating like RSA. I want to return to Natal but it is hard to handle the crying of the outfitters in RSA. Compare the area the RSA PH has to travel to what they travel in Zim for instance. Oh the H*ll with it I think I will NZ this year.

I think SA will continue to improve until the World Cup in 2010. The decade after that will be the real test whether SA will be the exception to the African Rule.