South Africa’s consumers have started feeling the impact of a weakening rand with analysts predicting that even the drop in the oil price will not salvage economic downturn.
“The impact is starting to come through with petrol having an under-recovery of more than ten cents. This is where it all starts,” Isaac Matshego, Economist at Nedbank, told CNBC Africa.
“We have seen a drop in the oil price, but going forward, this drop will not compensate for the rand weakness.”
Tertia Jacobs, Treasury Economist at Investec said the rand has been weakening as far back as 2011 but this has accelerated over the past few weeks.
“Since December the rand has plummeted by 12 to 15 per cent, the risk is that we are going to see the pass through in the following months,” she said.
“Previously the outlook for inflation deteriorated but it was always seen as temporary bridge, but this time around it looks like it will be at six per cent for longer.”
Liang Du, China Balanced Fund Manager at Prescient added that, some of the challenges South Africa face where as a result of China’s change of focus from commodity based growth to services.
“China is moving towards services growth compared to previously when it has been focusing on commodity growth,” he said.
“China is rebalancing and moving away from commodity intensity growth and this is having ripple effects” on economies, such as South Africa.