Everything about South African Rand totally explained
The
rand is the
currency of
South Africa. It takes its name from the
Witwatersrand (
White-waters-ridge in
English), the ridge upon which
Johannesburg is built and where most of South Africa's gold deposits were found. The rand has the symbol "R" and is subdivided into 100
cents, symbol "c". The
ISO 4217 code is
ZAR, from
Dutch Zuid-Afrikaanse rand.
The rand is the currency of the
Common Monetary Area between
South Africa,
Namibia,
Swaziland and
Lesotho.
History
The rand was introduced in
1961, coinciding with the establishment of the
Republic of South Africa. It replaced the
South African pound as legal tender, at the rate of 2 rand = 1 pound or 10
shillings to the rand.
Coins
Coins were introduced in 1961 in denominations of ½, 1, 2½, 5, 10, 20 and 50 cents. In 1965, 2-cent coins replaced the 2½-cent coins. The ½-cent coin was last struck for circulation in 1973. 1-rand coins were introduced in 1977, followed by 2- and 5-rand coins in 1989 and 1990, respectively. The 1- and 2-cent coins were discontinued in April 2002, primarily due to inflation having devalued them. All prices are now rounded to the nearest 5 cents.
In an effort to curb counterfeiting, a new R 5 coin was released in August 2004, as well as new banknotes in
February 2005. Security features introduced on the coin include a
bi-metal design (similar to the
€1 and
€2 coins, the
British £2 coin and the
Canadian $2 coin), a specially-serrated security groove along the rim and micro-lettering. The new notes also feature a number of new security features.
Banknotes
The first series of rand banknotes was introduced in 1961 in denominations of 1, 2, 10 and 20 rand, with similar designs and colours to the preceding pound notes to ease the transition. They bore the image of
Jan van Riebeeck, the first
V.O.C. administrator of
Cape Town. Like the last
pound notes, they came in two variants, one with
English written first and the other with
Afrikaans written first. This practice was continued in the 1966 series which included the first 5 rand notes but didn't include the 20 rand denomination.
The 1978 series began with denominations of 2, 5 and 10 rand, with 20 and 50 rand introduced in 1984. This series saw a major design change. In addition, the series has only one variant for each denomination of note. Afrikaans was the first language on the 2, 10 and 50 rand, while English was the first language on 5 and 20 rand. The notes still bore the image of
Jan van Riebeeck.
In the
1990s, the notes were redesigned with images of the
Big Five wildlife species. With the 2 and 5 rand coins replacing notes, notes were introduced in 1994 for 100 and 200 rand.
The 2005 series has the same principal design, but with additional security features such as colour shifting ink on the 50 rand and higher and the
EURion constellation. The obverses of all denominations are printed in English, while two other languages are printed on the reverses, making all eleven official
languages of South Africa available.
Brief exchange rate history
A rand was worth more than a
U.S. dollar from the time of its inception in
1961 until
1982, when mounting political pressure combined with sanctions placed against the country because of
apartheid started to erode its value. The currency broke above parity with the dollar for the first time in March
1982, and continued to trade between R 1–R 1.30 to the dollar until June
1984, when depreciation of the currency gained momentum. By February of
1985, it was trading at over R 2 per dollar, and in July that year all
foreign exchange trading was suspended for 3 days to try and stop the devaluation.
By the time that
State President PW Botha made his infamous
Rubicon speech on
15 August 1985, it had weakened to R 2.40 per dollar. The currency recovered somewhat between
1986–
88, trading near the R 2 level most of the time and even breaking beneath it sporadically. The recovery was short-lived however, and by the end of
1989 the rand was trading at levels of more than R 2.50 per dollar.
As it became clear in the early
1990s that the country was destined for black majority rule and one reform after the other was announced, uncertainty about the future of the country hastened the depreciation until the level of R 3 to the dollar was breached in November
1992. A host of local and international events influenced the currency after that, most notably the
1994 democratic election which saw it weaken to over R 3.60 to the dollar, the election of
Tito Mboweni as the new governor of the
South African Reserve Bank, and the inauguration of President
Thabo Mbeki in
1999 which saw it quickly slide to over R 6 to the dollar. The controversial land reform program that was kicked off in
Zimbabwe, followed by the
September 11, 2001 attacks, propelled it to its weakest historical level of R 13.84 to the dollar in
December 2001.
This sudden depreciation in 2001 led to a formal investigation, which in turn led to a dramatic recovery. By the end of
2002, the currency was trading at under R 9 to the dollar again, and by the end of
2004 was trading at under R 5.70 to the dollar. The currency softened somewhat in 2005, and was trading at around R 6.35 to the dollar at the end of the year. At the start of
2006 however, the currency resumed its rally, and, as of 19 January 2006, was trading at under R 6 to the dollar again. However, during the second and third quarters of 2006 (ie April through September), the Rand weakened significantly. In Sterling terms, it fell from around 9.5p to just over 7p, losing some 25% of its international trade-weighted value in just six months. Late in 2007, the Rand rallied modestly to just over 8p, only to experience a precipitous slide during the first quarter of 2008. As at the time of writing (1st April 2008) the Rand stands at just over 6p (approx 12 US cents).
This downward slide could be attributed to a range of factors: South Africa's worsening current account deficit, which widened to a 36-year high of 7.3% of Gross Domestic Product (GDP) in 2007; inflation at a five-year high of just under 9%; escalating global risk aversion as investors' concerns over the spreading impact of the sub-prime crisis grew; and a general flight to "safe havens", away from the perceived risks of emerging markets. The Rand depreciation was exacerbated by the Eskom electricity crisis, which resulted in the utility being unable to meet the country's rapidly growing energy demands. In particular, major mines were shut down, with Eskom warning that major new industrial projects couldn't be powered until additional power generation capacity could be brought on stream - something unlikely to be achieved for at least another 5 years. This would have a significant impact on production and exports by South Africa's mining industry, and would thus worsen an already worrisome current account deficit. It is particularly galling that this should have happened at a time of record high prices for hard and soft commodities.
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