By James Hall
JOHANNESBURG, Apr 11 2003 (IPS)

The steady, sturdy rise in the value of the South Africa rand, which is used throughout the 14 member states of the Southern African Development Community (SADC) officially and unofficially, has brought surprising little cheer amongst economists and the public.

"If the rand is going up, and the dollar is going down, and oil prices are set in dollars, why am I paying more, not less, at the pump?" asks Thabo Kinder, a motorist filling up at a petrol station in the Indian Ocean seaport Durban.

"The only prices that are going down are maize prices, and this hurts farmers because maize is locally grown," complains an agricultural field officer with Swaziland’s ministry of agriculture.

With the rand rising from R8.25 to a dollar to R7.75 to a dollar in just a week, imports would naturally be expected to decrease in price, especially when the rand was 13 to a dollar a little more than a year ago.

"There is a lag time after a currency’s value changes and the reflection of this change on consumer prices," a source at the South African Reserve Bank says.

Indeed, while prices seem sky-high now, and each visit to a store from Lesotho to Tanzania seems to find higher prices for goods on shelves, this is because the dramatic depreciation of the rand two years ago is still being compensated for.

But while consumer prices may lag behind currency value developments, commodity prices are fixed daily, and contracts for exports are also sensitive to currency fluctuations.

This is bad news for the countries of Southern Africa, which are increasingly dependant on exports as a way to bolster their economies.

Writing in the South African weekly the Mail and Guardian, economist Thebe Mabango noted that the rand has gained in value 20 percent against the common European currency, the Euro. He drew attention to declining export volumes – the amount of South African goods shipped overseas – which resulted from the belief of foreign buyers that the rand was simply overvalued. Buyers of South African goods now consider them overpriced, so they buy elsewhere.

The same negative development affects directly those economies, like Botswana and Swaziland, whose currencies are tied to the rand on a one to one basis. But all regional economies are in some way tied to the regional economic giant, South Africa.

"When South African exports get a stomach ache, it is the export industry of Lesotho that first goes to bed ill," says the Reserve Bank source.

2002 trade between the United States and sub-Saharan Africa fell 15 percent. But two key trade agreements, the Generalised System of Trade and the African Growth and Opportunities Act (AGOA), have been instituted to bolster trade.

Under AGOA, goods from select countries enter the U.S. market duty free, giving them a price advantage. In some instances, this has countered the effect of higher prices due to the stronger rand. While U.S. trade with sub-Saharan Africa fell overall last year, US imports of goods shipped under AGOA rose 10 percent.

According to trade officials with the U.S. State Department, AGOA is responsible for 10,000 new jobs in Lesotho, 20 new textiles factories in Swaziland, and has spurred 250 million U.S. Dollars in new foreign direct investment in Namibia. Further, AGOA is seen by the United States as a stepping-stone toward an ultimate goal of a U.S. Free Trade Agreement with all of sub-Saharan Africa.

Regional tourism is also suffering the double disadvantages of higher local prices for foreign visitors and a worldwide travel slowdown in the wake of the War in Iraq.

South Africa is now 30 percent to 40 percent more expensive for Americans using U.S. dollars, compared to 16 months ago. The same holds true for Swaziland, Lesotho, Namibia and Botswana.

"Cape Town (South Africa) is now so expensive it is beyond the ability of most South Africans to visit, but now Europeans are complaining about the prices," says U.S. travel agent Angela Zucker.

Just as the member states of SADC wish to increase exports to spur economies, so are they keen to boost tourism as a way to bring in hard currency.

"But the one of the hardest currencies right now, and getting harder, is the rand," complains Thulani Mbingo, a reservations agent with Big Game Parks of Swaziland. His game parks advertise their prices in dollars as well as rand, and foreign visitors can make reservations and arrange pre-payments in dollars, booking months in advance. This has led to a drop in park profits as the value of the dollar has weakened.

"Southern Africa has always marketed itself as a reasonably priced placed, indeed as a location which is a real bargain for holiday seekers. This is still relatively true, but not nearly to the degree it was just last year. So, in addition to price, we have to emphasise in our marketing the unique sights available only here, the animals and scenery," says Martin Lushaba of Swaziland’s Ministry of Tourism.

A strengthening rand does not necessarily indicate a strong economy, but rather South African monetary policies like high interests rates that make the currency attractive to currency speculators even if the nation continues to struggle with poverty, unemployment and moderate industrial growth.

Economists also fret that dramatic shifts in the value of the rand signal instability, which is one condition no investor looking at the long term, instead of short term currency speculation profits, can tolerate.

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