The weaker rand poses a looming threat to the drive to encourage South Africans to buy locally produced products‚ say economists.
But economists warn that while noble‚ the campaign is "fraught with challenges"‚ as the weakened rand could trigger price increases and curb consumer spending.
Local procurement has been recognised as a key driver for economic growth. As part of the government's commitments to the Local Procurement Accord‚ signed in October 2011‚ the plan is to source 75% of products and services locally. A new drive is also under way to launch a loyalty programme via banks and retailers to incentivise local procurement.
While there is unanimous agreement over the benefits that the local procurement of products could bring‚ such as job creation and a strengthening in industrial and manufacturing sectors‚ the weakened currency will make it extremely difficult for local players to compete with ready-made foreign imports‚ according to Meganomics chief economist
"Labour costs and disruptions and other input costs mean local manufacturers will really feel the pinch. Buying local may not be price-efficient‚" he said.
The rand has hit its lowest level in five years against the US dollar this year‚ losing about 25% of its value over the past 12 months.
Manufacturing Circle's managing director
"We cannot expect to grow‚ develop and increase employment as a country if we simply continue to be located in a world economy as producers and exporters of primary products and importers of finished goods‚" he said.
There are indications that the manufacturing sector has already been hard-hit by the rand's performance. According to the
Local producers in the textiles and poultry sectors have complained about the influx of cheap imports that have crippled manufacturing capacity and led to job cuts.
"How much longer the rand will continue to battle‚ no-one knows‚ although it would be premature to dismiss it. We can (certainly) anticipate a recovery in the long-term‚" said Garrow.
Although the weakening of the rand has been largely attributed to the unenthusiastic outlook global markets have adopted with regard to emerging markets‚ certain destructive local and international factors have played a role‚ according to Johann Els‚ senior economist at
The Buy Local programme could face some real problems. Image: eddy182182 Deviant Art"In the short term‚ there are many negatives for the rand both nationally and internationally. Just here at home‚ factors affecting the currency include the large current account and budget deficits‚ lack of economic growth‚ unemployment‚ policy issues as well as the uncertainty that comes with an election year‚" Els said.
He said international factors included the decision by the
"In the medium term we should see some stability in the currency because of stronger and more synchronised developed economy growth. This‚ combined with a more competitive currency‚ should benefit exports. And combined with more expensive imports‚ should limit imports. The combined effect should mean an improving position on the current account balance‚" Els said.
SA's current account deficit is -6.5% of gross domestic product (GDP). It reflects a combination of factors‚ including a sizeable increase in imports‚ and some deterioration in net dividend outflows
The Treasury's forecasts for GDP will be closely monitored in the budget speech on 26 February‚ as negative sentiment over strikes has hit the level of foreign investment.
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