WHEN SA SNEEZES SADC CATCHES THE COLD

Sir

Recent events in South Africa where President Jacob Zuma unexpectedly wielded the axe on former Minister of Finance Pravin Godhan and eight more of his counterparts resulting in the Rand plummeting in value by two per cent have reignited debate on the sustainability of the region depending on that country for economic solace.

Last week, the South African Rand, a major trading currency in the SADC region, took a two per cent knock on the back of Zuma’s Cabinet reshuffle which is now known as ‘Zuma’s night of long knives’.

Moreover the manoeuvres in South Africa have also raised debate on whether it is sustainable for countries like Namibia to sustain pegging their currency (the Namibian Dollar) one-on-one to the Rand bearing the adverse effects of poor decision making on anything down south.

It has also brought into question whether countries like Zimbabwe should adopt the Rand as their currency. While the Rand has been one of the currencies in the basket of foreign currencies introduced in Zimbabwe in 2009, together with the United States Dollar, to ease that country’s economic challenges, there have been recent calls for the country to go full throttle and adopt the Rand following an acute shortage of the greenback.

Ironically, South Africa is the largest economy in the region and also has the second largest Gross Domestic Product (GDP) on the African continent after Nigeria.

That dominance of the South African economy in regional affairs has seen it taking the lion’s share of the Southern African Customs Union dividends and also remain the leader in industrial growth.

The unfolding political events in South Africa confirm the belief that when South Africa sneezes the whole of the Southern African Development Community catches the cold because of the dominance of the South African Rand and their economy in the region.
The decision by Zuma saw the South African Rand going on a freefall from trading at R12.24 to the greenback to trading at R13.53 within hours of the Cabinet reshuffle.

The South African economy by far the largest and competitive in the Southern African region, is the biggest exporter to countries like Namibia Swaziland, Botswana, and Lesotho which make up SACU, the world’s oldest customs union.

In countries with a narrow industrial base, such as Swaziland that rely on the importation of most consumer goods and coupled with an arid climate dependant on the importation of most of the foodstuff, increasing import prices can finally lower the population’s standard of living unless they are compensated for the rising costs of living by increasing salaries, wages and or social transfers.

Anonymous

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