The weak rand has created a “marvelous situation for exporters”, if they can sell their product, says Econometrix director and chief economist Dr Azar Jammine.

“The currency is as cheap as anything.”

Jammine says conditions are ideal for exporters.

“Theoretically you would have expected inflationary pressures to increase enormously because of where the rand is, but because activity is so low people are taking salary cuts and businesses are finding it difficult to pass on cost increases. 

“Under normal circumstances, where the average value of the rand should have been R14, R15, you now have a situation where you are at R18 to the dollar and you won’t have inflationary pressures for quite a while.

“Also, fuel prices are at such low levels.

“So, if you have some ideas on exporting, don’t waste any time. This is the time to get in there.”

Jammine describes the current competitiveness of South Africa exporters as “unbelievable” and likely to remain so for a “good few months”.

“So, if you are an exporter, it is absolutely wonderful. If you are in imports, you are going to be annihilated.”

Jammine adds that these conditions have also created the opportunity for local companies to “climb in and start producing goods that were previously imported”.

U-shaped Scenario
Jammine says Econometrix believes that it is most likely that the global Covid-19 pandemic will have a U-shaped effect on the South African economy, rather than the more upbeat V-shaped scenario, or worst-case L-shape scenario.

A U-shape scenario says the damage inflicted by Covid-19 will be with South Africa for some time – “certainly through to the end of the year”.

“We’ll have fears of successive lockdowns, and social distancing will remain with us as a constraint on economic activity for the rest of the year. But, hopefully, next year we’ll gradually start recovering from this.”

In the U-shaped scenario the South African economy contracts by 6.5% this year, says Jammine, recovering by 1% or 2% next year.

This scenario also means that the rand should hold steady at around R17, R18 to the dollar for quite a while.

* Jammine was a guest on the AfriSam Webinar Series