The Dipping Rand Means Cheaper Travel in Southern Africa for International Tourists
The weak rand is causing headaches for South Africans, but it makes travelling to South Africa at current exchange rates much more affordable for international travellers from several countries. The decline of the rand against major currencies, such as the Euro, British pound and (US dollar, makes it cheaper for British, American and European travellers to book holidays in South Africa.
Since the beginning of 2013 the rand has dipped *17% against the US dollar. Today the rand is sitting at about R10 to the US dollar (about R15 to the pound sterling or around R13 to the Euro). This means foreign currency will go a lot further while travelling in the country and when buying safari packages in rands. (*See our 2015 update post: Luxury for Less: Now is the Time to Tavel to South Africa)
“From a visitor perspective, it all bodes well for international visitors coming to Cape Town,” said Cape Town Tourism CEO Enver Duminy. (Weak rand a tourist’s dream)
The Weak Rand Makes it Cheaper to:
- Buy holiday packages and book safaris
- Go shopping and eat out
- Participate in activities paid for in rands (bungee jumping, fishing etc)
- Stay in hotels, lodges and other local establishments
- Rent a car (although petrol prices are higher)
According to the owner of Abangane Guest Lodge in Hazeyview
"When looking at the exchang rate especially Euro and USD, SA has hardly ever been cheaper."
Read more in Prices Increasing? on Tripadvisor.
Why is the Rand Weak?
Reports show that global and local factors have contributed to the decline of the rand in 2013.
"Around half of the fall in the rand over the past month or so appears to have been due to global factors, while the other half has possibly been due to domestic factors such as labour unrest. With these problems unlikely to abate any time soon, we expect the currency to remain weak in the coming months..."
"... Meanwhile, South Africa’s large and widening trade deficit is keeping pressure on the rand."
Read more on What is driving the weakness of the South African rand? on Moneyweb.
Labour unrest is one of the primary local factors driving the weak rand, which is predicted to remain weak for the coming year.
"South Africa's rand will remain weak over the next year on expectations of a persistently wide current account gap, with the threat of labour unrest in its mining sector acting as a further drag, a Reuters poll found."
Over half of South Africa's exports come from mining, and further disruptions to production would likely hurt the economy and the currency.
Rand to remain weak this year by Reuters.
Impacts on the Economy
According to Moneyweb, local impacts include:
"In terms of what this means for the economy, a weaker rand would be of benefit to South African exporters, who have struggled to maintain competitiveness in past few years. But it is likely to keep inflation elevated, and we think the headline CPI rate will breach the upper bound of the Reserve Bank’s 3-6% target in the near term (from 5.9% y/y in April). This supports our view that interest rates are likely to be kept on hold at 5.00% for the next six months, despite the fact that economic growth is likely to remain weak."
The weakening rand has numerous implications - some complex and long ranging and others more short term and obvious. The jist of the situation with the dipping rand is that it makes it a good time to save on holidays to South Africa and tour packages bought in South African rands as exchange rates are favourable for visitors from abroad.
Basically - you're going to get more for your money when exchanging into rands and safaris will cost less, so strike now while the iron is hot!
*UPDATE: Read our recent post Luxury for Less: Travel to South Africa While the Rand is Weak (published June 2015)