South African Rand (ZAR) - Currency of South Africa

The South African Rand is used as the national currency by the Republic of South Africa. Generally abbreviated as ZAR, the South Africa currency is further subdivided into 100 cents. Introduced in the year 1961, this South Africa Currency is used by the Common Monetary Area, consisting of four countries – Zimbabwe, Swaziland, Namibia and Lesotho. Between 1961 and 1982, the South African currency had a higher value against the US Dollar. In 1990’s the South African currency got a new look with images of Big Five wildlife species.

Some facts that you ought to know about the zar:

1. The short name for South African currency is ZAR –Zuid –Afrikaanse Rand.
2. The symbol for ZAR is R.
3. The coins used the most are 5C, 10C, 20C, R 1, R 2, R 5.
4. The most frequently used banknotes are C R 10, R 20, R 50, R 100, R 200.
5. The South African reserve bank is the official bank of South Africa.

History of South African Rand

South Africa, being one of the most popular countries in the African continent, has an interesting history of its currency. South African Rand is the official currency and is called ZAR. Introduced on 14th February 1961, when the country became a republic. The term “rand” comes from “Witwatersrand,” the name of the high escarpment located in Johannesburg, which is the capital city of South Africa.

ZAR is commonly used as an abbreviation for Dutch Zuid-Afrikaanse Rand. It was introduced by replacing the British Pound with 2 Rand = 1 pound and 10 shillings. It aimed to bring a stable economic transactional system to the country. It is denoted by the letter R and is subdivided into 100 cents. The South African Rand is a legal currency in Namibia, Lesotho, and Eswatini.

The currency faced major shifts in its value after the 1970s. First introduced in 1961, ZAR (South African Rand) saw a fairly good beginning and it was seen as an auspicious beginning for the economy. The currency was introduced at a time when the country was witnessing financial instability and it was seen as a hope for revival. For the first five years, ZAR had a higher value than the US Dollar. The status did not last long as the value of the currency started to decline substantially in the later years. As the currency got linked to the international market its value kept decreasing. There are numerous reasons for the steep decline including the ongoing inflation back then and Africa’s political philosophies.

Up until the mid-1970s South African Rand had its value intact being 1.5 Rands per US dollar. By the year 1985, it went to 2 Rands per US dollar. This was the period when the nation halted all foreign exchange activity to curb the instability. However, in the following five years, it went to 3 Rands per US dollar. In the last decade, the currency has stepped to an all-time low and has lost half of its value.

The currency is minted by the South African Reserve Bank. In the initial years, notes and coins of Rand featured the images of activists who fought for the country’s rights. Later on, it was changed to important rivers and monumental designs. Presently, both banknotes and coins feature images of Nelson Mandela. The banknotes are available in 10, 20, 50, 100, and 200 rands and coins are available in denominations of 1, 2, 5, 10, 20, and 50.

Factors Affecting the Exchange Rate of the South African Rand

The exchange rate of the Rand is affected by several factors. The pointers below explain in detail the exchange rate trend of ZAR:

1. Export

ZAR’s value depends mostly on gold exports to the country. Due to the financial crisis, the International community finds it more reliable to improve relations with developed currencies of the US and Japan which led to a decline in South Africa’s gold exports. This has led to a major decline in ZAR’s value. In addition, China’s unstable economic situation also impacts ZAR as China is the biggest receiver of South Africa's exports.

2. Low commodity prices

ZAR is considered a commodity currency. The country relies heavily on its export of minerals such as platinum, chromium, and iron ore. In addition, it is the world’s largest exporter of platinum. South Africa has lower commodity prices, at present. The reason behind the same is that China being the biggest importer of South Africa's commodities has decreased its demand. This impacts the currency and results in a lower value in the International market.

3. Political Policies

South Africa has always been a country with severe political instability which has impacted its relations with other countries as well. To date, the country has witnessed problems creating stable diplomatic relations which impact its economy and eventually the currency.

4. Global Uncertainty

Every currency is subjected to fluctuations in the International community. ZAR is highly impacted due to inflation which results in fluctuations in its value. In times of inflation, countries choose to sell their useless assets to developed countries and South Africa, being an economically backward country, can not afford to participate in these transactions leading to a lower value of its currency

5. Unemployment

South Africa faces severe unemployment issues due to several reasons including strict labour laws and bureaucratic hurdles. This in turn impacts the economy and decreases the value of ZAR even further.

Also, when the world was going through inflation in 2008, ZAR was pushed down. The international community detached from making transactions with South Africa which led to a decline in export revenue as well. China being the key trading partner of the country withdrew a major chunk of its trade relations. Also, the September 2011 attack and the 2007-2008 financial crisis are other factors that affected the currency. The 2011 attack forced the country to divert its major focus on reviving the ill effects of the attack.