It is becoming more and more painful for South Africans to travel overseas.
Since the beginning of democracy, the Rand has gotten steadily weaker.
Now, I’m no finance genius, but there are some things that are supposed to make sense and don’t.
For example, let’s take foreign exchange. Since my good fortune to start travelling, I have always tried to understand exactly how the exchange rate works.
Why does an American Dollar cost R12.95 and why is a British Pound always so damn expensive?
It cost R16.13 at the time I was writing this.
It’s hard to believe the old people’s stories of the days when a Dollar cost R1 and the Pound was actually a bit weaker than the Rand.
Where did it all go wrong; and how does it work?
Some people say it’s just too hard to understand and that I shouldn’t even brother.
And then there are those who over the years, have been determined to help me understand. So this is what I know!
The way it is best explained is that a currency’s international value is almost always determined by sentiment.
In other words, currency traders sitting in larney offices in the world’s leading cities, decide what the Rand is worth today, and often based on some very arbitrary facts.
They may decide the Rand is worth less today, because they heard on the news that someone got shot in Botswana, not understanding that Botswana is thousands of kilometres away from here.
Here’s what I could never understand: if currency value is determined by global sentiment, why was the Rand so strong during apartheid when reasonable governments supposedly hated Pretoria’s policies?
And why does the Rand stay weak, even when we are doing well politically and socially?
For example, why didn’t our Rand’s value sky-rocket past the Dollar, when Donald Trump became president? Or when the Brexit vote happened?
These are things I have been wondering about.
And now it turns out my confusion may, in fact, be justified.
The answer could be currency manipulators. It turns out those same currency traders whose moods determine Rand value have not been playing fair.
In case you were wondering what the currency rigging story is all about, that is pretty much it.
These guys have been fixing the price of the Rand among themselves and making millions as a result.
Yes, the detail is involved and you do need an actuary, a chartered accountant and a forensic auditor to help you understand the numbers. But the big picture is not that difficult at all.
These guys are the reason I can no longer travel overseas as often as I would like.
But, more importantly, it’s also the reason why we pay through our noses for certain imports and why our currency will never be able to catch up again.
But the real damage comes in the form of our national psyche.
We remain a developing nation, no matter how well we’re doing.
The period from 1994 to 2000 was our most socially and politically stable time; our honeymoon when we were the darling of the international community.
Nelson Mandela was in charge and while we had a lot to learn, sentiment was in our favour.
So there’s the sentiment argument; and according to the lessons I’ve been taught, the Rand should’ve been the strongest currency in the world in 2000.
But, it turns out my finance mentors were wrong all along.
Currency and market value as a whole, is not driven by sentiment.
Like most things involving profit, it’s driven by greed.
So the Dollar will just keep on pounding the Rand!