The rand has seen a continuous period of weakening against major markets in the past 12 months. This can be amassed to many factors such as violent strikes in various sectors, stronger trade laws being accepted in the EU or an increase in the demand for oil for the USA. The petrol price in South Africa has seen a large increase, over the course of 2013; the petrol price increased from R11.65 to R13.57, an increase of over 16%. This increase of the petrol price, coupled with the weaker exchange rate may have significant impacts on the growth of the entire sub Saharan region.
South Africa has trade agreements with most of the sub Saharan region. There is the SADC, SACU, TDCA and FTA to name a few. All of these trade partners are negatively affected by the situation in South Africa for two fundamental reasons; the first reason is that as the fuel price increases the transport costs of goods so to increase. Trucks account for 75% of all logistic transport in this region, and the increase in fuel price increases the price of transporting the goods. The second reason is that the depreciation of the rand increases international exports and decreases imports. The increase of exports into international territories mean the supply is shifted away from trade partners, leaving the demand equal but supply less, increasing the prices of the goods further.
In 2014 South Africa is set to be in for a rough ride. The petrol price is already increasing, strikes provide further discontent for international investors and being an election year, the focus is on promises and not operations. The rand may also decrease to around R13.20 to the dollar increasing all consumer goods prices and will see inflation rise above 7%.