The current weak rand was expected to provide a boost to vehicle exports, especially from the second half of 2014, said Econometrix director and chief economist Dr Azar Jammine on Tuesday.
Speaking at a Ford Motor Company of Southern Africa media briefing in Johannesburg, he said the recuperating US and European economies meant that South Africa’s export markets were “gaining some traction”.
Tracking the rand and vehicle exports, he said it appeared as if South African vehicle exports usually gained momentum about a year after the rand had deteriorated.
Jammine said the rand is 30% cheaper than it was two-and-a-half years ago, which “must be a huge competitive advantage, as long as costs are not allowed to rise too much”.
He believed the currently “incredibly cheap” rand would end the year at around R10.80 to the US dollar – it was R11.19 on Tuesday morning.
He said the rand could end 2014 at below R11 to the dollar, even if “it blows to R12” in the short term, as such a dramatic weakening would again lure investors to the local market.
He also did not believe that the rand would worsen from its current position “a year or so from now”.
However, he did warn that he was not forecasting a recovery to R8 or R9 to the dollar, owing to South Africa’s massive trade deficit and its dependence on capital inflows.
Jammine expected inflation to rise to between 6% and 7%, but not much more, especially owing to the Reserve Bank’s preemptive move last week to increase the prime rate by 0.5%.
He anticipated another 0.5% rate hike in March and May, respectively, which “would be enough to keep a lid on inflation”.
However, rising interest rates were bad news for the local automotive industry, as every 0.5% increase in the interest rate spelled a 2% decline in vehicle sales.
In light of this, Jammine said he expected zero per cent growth in new vehicle sales for 2014, which he regarded as a “year of consolidation”.