of course SA isn't totally self-contained, but import inflation is really of comparatively little concern, since the country is running a huge trade surplus ('huge' compared to the size of the total economy).
and yes, it is of course true that SA inflation rates remain well above comparable industrial nation inflation rates, but the wage increases for the miners have been consistently exceeding the SA inflation rate since at least 1988. i expect this trend to continue, especially as the mining companies can easily afford these wage increases.
no doubt the extreme weakness of the Rand will eventually filter through, however, South Africa is self-sufficient in food production (it is in fact Africa's largest food exporter), electricity generation (it produces nearly 70% of the continent's electricity), car manufacturing (it is also a big exporter of cars and car parts as it were), and several other industries.
the only major necessity that SA doesn't have is crude oil. however, SA has vast reserves of coal , and it has SASOL's oil-from-coal conversion plants, which can operate quite profitably at current Rand oil prices.
the main reason why SA's economy is self-sufficient in many industries are the economic sanctions that were imposed during the apartheid era. during that period, the SA economy WAS in fact largely self-contained, and was forced to adapt by producing much of what it couldn't import by itself.
the SA government in the meantime has shown great willingness to implement market-oriented reforms and is fiscally highly responsible. as i've mentioned previously, the weakness of the Rand can't be explained by perceptions regarding the SA economy. no matter which economic yardstick one looks at, the trend has been toward improvement. so the Rand need not necessarily remain a one way street. btw, South African benchmark bonds (government and ESKOM bonds) have recently hit all time low yields, which shows that in spite of the collapsing Rand, the market has a very benign view of prospective inflation risks. |
