Wayne McCurrie from FNB Wealth & Investments warned investors not to react emotionally because of the rand’s short-term weakness.
The rand has weakened significantly this year because of the country’s intensified load-shedding, poor economic growth, and structural problems.
The diplomatic fallout resulting from the comments by the US Ambassador to South Africa on 11 May 2023 led to a further sell-off in the rand.
It reached R19.51 to the US dollar on Friday, 12 May. It continued to weaken and reached a new low of R19.87/USD on Tuesday, 30 May.
The sudden decline in the currency scared many South Africans, who are now rushing to take their money offshore.
McCurrie said this could be a grave mistake as the rand is highly undervalued at the current levels.
“I don’t know where the rand is going when Russian President Vladimir Putin visits. It can be R20 or R21 to the US dollar. It can do anything in the short term,” he said.
“However, longer term, the rand is totally and utterly bombed out at this level. We must be cautious about making hasty decisions in times of panic.”
He said the rand had done this many times before, like when Des van Rooyen was appointed finance minister in December 2015, during the Covid pandemic, and the 2008 financial crisis.
“It is normal behaviour for the rand to suddenly weaken and scare investors into taking large amounts of money overseas,” he said.
However, it always recovers. This happened every previous time when there was a sudden decline in the rand’s value.
McCurrie added that the primary driver behind the rand weakness was not load-shedding, Putin, or the Lady R political fallout.
“The primary driver is that we are in a commodity down cycle. Hopefully, over the next year, global interest rates will be cut, inflation rates will go down, and economies will grow,” he said.
“In turn, the commodity cycle will pick up and pull South Africa and the rand up with it. Don’t panic, you will harm yourself.”