10 Cents – South Africa

In 2016, South Africa's currency, the rand, experienced significant volatility and depreciation, largely driven by a combination of domestic political turmoil and adverse global conditions. The year began with the currency hitting a historic low of nearly R17 to the US dollar in January, following President Jacob Zuma's unexpected removal of the respected finance minister, Nhlanhla Nene, in December 2015. This move severely damaged investor confidence, raising concerns about fiscal policy and governance. Although Zuma quickly reversed course and reappointed Pravin Gordhan, market trust remained fragile throughout the year, with the rand becoming highly reactive to political developments.

External factors compounded these domestic issues. As a commodity-exporting nation, South Africa was vulnerable to slowing growth in China, a major trading partner, which suppressed demand and prices for key exports like minerals. Furthermore, the prospect of rising US interest rates under the Federal Reserve led to capital flight from emerging markets, as investors sought safer, higher-yielding assets. This global risk-off sentiment placed sustained pressure on the rand alongside other emerging market currencies, creating a challenging environment for the South African Reserve Bank (SARB), which had to balance controlling inflation with supporting a weak economy.

Despite periods of recovery, the rand ended 2016 approximately 11% weaker against the US dollar compared to the start of the year. The persistent currency weakness fueled inflation, which breached the SARB's 3-6% target band, prompting interest rate hikes that further constrained economic growth. Ultimately, 2016 highlighted the South African economy's vulnerability to shifts in investor sentiment, with the rand's fortunes tightly linked to perceptions of political stability and the country's ability to implement prudent economic reforms amidst a difficult global backdrop.