Strong currencies are not “cool” any more. The economic system as we know it is dissolving into a new world and economic order right before our eyes. While politicians are using the term “change” as their trump card, change has always been the once consistent. Emerging economics is the new fashion of the global financial system.

When a Country A’s currency is worth more than that of Country B, not necessarily does it mean that Country A’s economy is stronger than that of B’s. For example, Japan’s economy is regarded as the world’s strongest, yet a single Japanese yen exchanges for less than $1. Cyprus’ economy is considerably smaller than that of the US, but their currency, the pound exchanges for almost double that of the US dollar.

So what constitutes the power of a currency? Is this even a relevant question in today’s financial system?

Something we ought to consider, the causes of poverty. These are critical to economic development, and undermine not necessarily the strength of a currency, but takes away some of the stability that lends towards sustained economic trade.

Let’s face it Africa is a rich poor continent. Africa is rich in resources and potential, but very poor in redistribution and commitment to her people. I recently read last year’s report published by Health Poverty Action, “Honest Accounts? The true story of Africa’s billion dollar losses”, on how development aid to Africa serves as a mere “smokescreen to cover up illicit financial flows, unfair trade policies and costs of adapting to climate change that drain the continent of its resources.”

These are the causes of Africa not progressing, not to gain a stronger currency, but neglecting to redistribute through efficient, ethical and constitutional obligations, the proceeds for developing Africa. We have to lay out these hindrances to Africa’s progress. If we are experiencing growth phenomenal growth in Africa with such enormous illegal activity by governments, our sustainable projections should be superior to any other continent, if my calculations are anything to go by.

It is funny how things change with time and a dose of irresponsible leadership. South Africa once hailed by far the most economically successful country in Africa has now slipped down the ranks and struggling to resurrect itself. South Africa at one stage accounted for 40% of the total GDP of the 48 countries south of the Sahara, and Nigeria, three times more populous, staggered behind in second place at 14 percent.

To prove the point of currency strength as not being a real indicator, the strongest currencies in Africa are Libya, Tunisia, Ghana, Sudan and Egypt. Look at their economies, and they a lagging behind considerably.

“South Africa ranks 132nd out of 144 countries for its primary education and 143rd in science and maths. The unemployment rate, officially 25 percent, is probably nearer 40 percent; half of South Africans under 24 looking for work have none. Of those who have jobs, a third earn less than $2 a day.”

“Conventional wisdom has it that globalization is a win-win but that is increasingly looking like a pope dream. There is no escaping the concerns that workers in high-wage countries have.” – Stephen Roach

In Africa as an emerging market this is the ideal platform for going global. These markets have all the attractions for investment and sustainable development.

Are new government priorities and an enthusiasm for unconventional monetary policies changing the way the currency markets work? They most certainly are!

Looking back at most of the world’s economic history, most countries pursued a strong currency—or a stable one. During the gold standard and the Bretton Woods system periods, governments exerted great efforts to maintain exchange-rate pegs, even if interest rates stimulated economic downturns. Only in exceptional economic eras of the 1930s and 1970s, were they deemed too painful and abandoned the pegs.

As the world exited the tail-end of the global financial crisis, we realised that strong and stable are out of fashion. Many countries, especially emerging markets and even the stronger countries seem content for their currencies to depreciate. “It helps their exporters gain market share and loosens monetary conditions. Rather than taking pleasure from a rise in their currency as a sign of market confidence in their economic policies, countries now react with alarm. A strong currency can not only drive exporters bankrupt—a bourn from which the subsequent lowering of rates can offer no return—it can also, by forcing down import prices, create deflation at home. Falling incomes are bad news in a debt crisis.”

“A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation.” – Ross Perot

We know that weak currencies are symptomatic of weak economies and weak nations. However, the 2008 financial crisis changed this completely. Emerging economies no have more leverage to attract investment for resources, job creation, skills development, health improvement and education. These are the main ingredients for emerging economies going forward.

Not only has times changed, but the game has changed itself. No more can there be significant currency wars because of the current structure of currency debt and previous currency trading. For instance, China holds a significant amount of US dollar debt and trading this off at a lower cost impacts negatively on all currencies. This may not prevent, but it certainly does stagnate currency wars. In turn this is good for emerging markets and the stability of their currencies.

It may not be the strongest currency on the continent but South Africa’s Rand is certainly one of the more consistent and stable emerging market currencies in the world. Over the last 20 years since the democratisation of South Africa, the Rand has performed considerably well.

Investors and fund managers trading in Sub-Saharan Africa consider the Rand “Real Money”. It is the most traded currency in Africa on a daily and monthly basis. Stephen Gallo, European Head of FX Strategy with BMO Capital Markets explains that, “The rand can also tend to lead other currencies on the decline and on the advance, because of its liquidity and the aforementioned reasons.”

All in all, emerging markets should be looking at their own sister currencies to determine how they need to perform on the global front.

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