• Locals will now procure SA goods for a song
With the South African Rand having crumbled to record lows, analysts are excited that Botswana will now procure goods cheaply from Africa’s second largest market by domestic production. Data from Bank of Botswana indicates that the Pula has appreciated against the Rand by 4. 4 percent, which makes imported goods from South Africa cheaper.
For the past year the Pula has been appreciating against the Rand reaching a minimum of 1.192 in February 2015 and a maximum of 1.44 on January 12, 2016.
According to Motswedi Securities Head of Research, Garry Juma, the appreciation of the Pula against the Rand is beneficial to the Botswana economy as about 80 percent of our imports come from South Africa.
Juma added that the appreciation of the Pula will help to reduce imported inflation. “Imports become cheaper and we will not feel much of the effect of the increase in prices in South Africa”, he added. He noted that major local manufacturers who buy most of their raw materials from South Africa could benefit by buying now when the Rand is weak.
He indicated that the appreciation in the value of the Pula against the Rand affects the exporters negatively. “Exporters’ earnings are declining due to the appreciation”, he added. The foreign price of local goods is increasing, making exports expensive which might lead to a fall in quantity of exports.
On the other hand, he indicated that the currency appreciation could worsen the trade balance. The increase in the value of the Pula makes local goods relatively less attractive to foreigners and imports into the country relatively less expensive, therefore net exports will decline. “It becomes cheaper to import from South Africa, the import basket rises and local products become less competitive”, he stressed.