Rand takes a hit against the gold standard
The Rand was once one of the most powerful currencies on the planet. However, here’s how much it’s dropped in value over the decades …
To gauge the true value of the Rand, or any currency, you need to examine its purchasing power over time.
The amount of goods a currency can buy provides the clearest measure of its real value. To do this, you must compare it against a lasting asset.
Similar to the McDonald’s Big Mac index, analyzing the Rand’s value against the gold price offers a reliable benchmark.
While gold prices fluctuate, its supply remains constant and its price is globally standardised. This method is known as the gold standard.
Measuring currencies against the US Dollar, however, does not account for a currency’s gradual weakening over time.
BAD NEWS FOR THE RAND
Looking at the Rand against the gold price since 1994 provides a true reflection of its real value. Unfortunately, the results are bleak. According to Daily Investor, the South African Rand has lost 98% of its value since 1994. In other words, a R1 coin in 1994 is worth just 2 cents in 2024.
This humbling figure mirrors the massive failure of the National Development Plan 2030, which anticipated 5.4% GDP growth from 2010 to 2030. Meanwhile, the economy has actually shrunk over the last decade and a half. Per capita GDP has fallen from R50 000 (2010) to R47 827 (2024). And is embarrassingly off the envisioned R120 000 per resident.
THE GOLD STANDARD
Using the gold standard, the Rand converts directly to a fixed gold price, explains the SA Reserve Bank (SARB).
One ounce (31 grams) of gold today holds the same value it has had throughout history. In 1994, one ounce of gold cost R1,308.
Today, it costs R61,199. This means that 31 grams of gold in 1994 would only buy 0.66 grams of gold in 2024.
In absolute terms, the Rand has lost 97.9% of its value. However, perspective matters: the US Dollar has lost 89% of its value since 1994 under the same gold standard.