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Diamonds protect against a falling SA Rand

Diamonds protect against a falling SA Rand

As analyst Joaquin Monfort, writing for, commented earlier this  year: “Those from South Africa who visit the UK, would have been unfortunate enough to see their buying power reduced by over a quarter, receiving only £410 for their 10,000 Rand – an almost 27% decline.”

Monfort goes on: “Although the currency had been weakening steadily all year due to increasingly negative economic fundamentals, it was in December that it took its worst hit, after President Jacob Zuma dismissed the country’s finance minister Nhlanlah Nene, following the news that the country’s credit rating had been down-graded.

Nene had been widely respected as a hand of moderation in the Zuma administration, and his shock dismissal was seen as opening the floodgates to a tide of potentially irresponsible spending, in a government already reeling from accusations of wide-spread corruption and cronyism.

It didn’t help that Nene was replaced by near unknown with little experience in Finance, David Van Rooyen, and the Rand continued heading south.

It was only until Van Rooyen was himself ejected after only 5-days in office and replaced by respected operator and former finance minister Pradhan Gordhan that the currency stabilised.

The situation worsens

According to Reuters there is little sign of a let up in the pressure on the rand, which is set to continue weakening:

“South Africa’s rand was under pressure on the first trading day of 2016, with pressure on the currency set to continue as weak domestic fundamentals weigh.”

Extremely high levels of unemployment, with over a third of young people out of work, increasingly fraud and endemic conflict between government and unions, falling commodity prices hitting mining exports, China slowdown fears which is a major trading partner and finally a flight of western capital which had been invested in emerging markets but is now rapidly being repatriated due to Fed hike concerns, are all factors weighing on a grim horizon.

What to do

With the outlook for the South African economy looking more dire every day, investors are looking to diversify into US$ linked commodities. One of these investments are gem quality diamonds that not only hold their value to the US$, but are a portable hard asset – in demand all around the globe.

For South Africans investment diamonds offer a uniquely treasured hedge against the volatility of the SA Rand. Today, an increasing number of South Africans are turning to an investment that gives them the most power and flexibility.


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