BILATERAL RELATIONS AND TRADE BETWEEN AUSTRALIA AND SOUTH AFRICA – MONETARY CURRENCIES AND EXCHANGE RATES
History of Relations
South Africa and Australia had first established diplomatic relations in 1947 and enjoyed close political and economic ties since. During campaigns for South Africa’s international isolation in the 1970s and 1980s, Australia acted as part of the anti-apartheid camp, supporting UN resolutions and implementing oil, trade and arms embargos as well as sport boycotts against South Africa.
After the first democratically elected Government of South Africa took over in May 1994, relations were normalised, and currently excellent relations are enjoyed.
Trade between Australia and South Africa has grown significantly since 1990. The trade between the two countries is relatively complementary. Both countries have also undertaken significant reforms of their tariff structures. Motor vehicles are of most interest to the analysis of Australia-South Africa trade. Both countries export passenger motor vehicles to each other, and both still have significant tariffs on this sector.
South Africa exports products and commodities like vehicles, base metals and articles of base metal, chemical products, wood pulp, machinery and mechanical appliances, minerals and animal products to Australia.
South Africa mostly imports Australian products and commodities like chemical products, base metals and articles of metal machinery and mechanical appliances, mineral products, vegetable products and leather.
An MOU was signed between Australia and South Africa in 2010, recognising the history of cooperation between the two countries and aiming to strengthen political, economic and strategic engagement. South Africa is Australia’s largest export market in Africa with two-way trade in goods and services that totalled AUD 3.6 billion in 2017. South Africa is also Australia’s most significant investment partner in Africa, with bilateral investment nearing AUD 15 billion in that year.
WHAT AN AUSTRALIAN DOLLAR IS AND WHERE IT IS USED
Australia, including its external territories Christmas Island, Cocos (Keeling) Islands, and Norfolk Island, uses the Australian dollar as official monetary currency. It is also officially used as currency by three independent Pacific Island states: Kiribati, Nauru, and Tuvalu.
The Australian dollar was also legal tender in Papua New Guinea until December 1975, when the Papua New Guinean kina became sole legal tender; and of the Solomon Islands until 1977, when the Solomon Islands dollar became sole legal tender.
CURRENT DENOMINATIONS, ABBREVIATIONS, VALUATIONS OF THE AUSTRALIAN DOLLAR
Within Australia, the currency is almost always abbreviated with the dollar sign ($), with A$ or AU$ sometimes used to distinguish it from other dollar-denominated currencies. The $ symbol precedes the amount. Its international code is AUD.
The Australian dollar is subdivided into 100 cents.
Coins were introduced in denominations of 1, 2, 5, 10, 20 and 50 cents. One-dollar coins were introduced in 1984, followed by two-dollar coins in 1988 to replace banknotes of that value. One- and two-cent coins were discontinued in 1991. In 2013, Australia’s first triangular coin was introduced to mark the 25th anniversary of the opening of Parliament House. Cash transactions are rounded to the nearest five cents. All coins portray Queen Elizabeth II and are produced by the Royal Australian Mint in Canberra.
The first paper issues of the Australian dollar issued in 1966 were $1, $2, $10 and $20 bills. The $5 bill was issued in 1967, the $50 was issued in 1973 and the $100 in 1984. Australia was the first country in the world to produce banknotes made from plastic (polymer). These notes provide better security against counterfeiting, are cleaner than paper notes, more durable and easily recyclable. All Australian bills are now made of polymer.
The central bank in Australia is called the Reserve Bank of Australia. As the fifth most traded currency in the world, the Australian dollar is also referred to as buck, dough, or the Aussie. The Australian dollar is known as a commodity currency due to its substantial raw material exports, hence it is affected by China and other Asian import markets. Due to its relatively high interest rates, the Australian dollar is often used in carry trades (a strategy in which a currency with low interest rate is sold in order to buy a currency with a higher interest rate) with the Japanese yen.
In 2016, it was the fifth most traded currency in world foreign exchange markets, accounting for 6.9% of the world’s daily share behind the United States dollar, the European Union’s euro, the Japanese yen and the United Kingdom’s pound sterling.
HISTORY OF THE AUSTRALIAN DOLLAR
Australia’s previous currency was the Australian pound, introduced in 1910 and distinct in value from the British pound sterling since the devaluation in 1931.
Since 1902 it was recommended that Australia adopt a decimal currency but only in 1959 a Decimal Currency Committee was appointed to examine the merits of decimalisation. A public consultation process was held in which over 1 000 names were suggested for the new currency. In 1963 it was announced that the new currency would be called the “royal”, but after widespread public disapproval, it was renamed the “dollar”.
The Australian dollar was introduced in 1966 to replace the pre-decimal Australian pound, with the conversion rate of A$2 per = A₤1. In 1967, when the pound sterling was devalued against the US dollar, Australia effectively left the sterling area and maintained its value to the US dollar at the rate of A$1 = US$1.12.
The Australian dollar is a popular trading currency because of the comparatively high interest rates in Australia, the relative low government intervention in the foreign exchange market, the stability of Australia’s economy and political system and the perception that it offers diversification benefits in a portfolio containing the major world currencies due to its greater exposure to Asian economies.
The highest valuation of the Australian dollar relative to the U.S. dollar was during the period of the peg to the U.S. dollar. In 1983 it was floated, allowing its value to fluctuate dependent on supply and demand on international money markets. The lowest ever value of the dollar after it was floated was 47.75 US cents in 2001.
Economists suggest that commodity prices are the dominant driver of the Australian dollar, meaning changes in exchange rates of the Australian dollar occur in ways opposite to many other currencies. This means the Australian dollar varies significantly during the business cycle, rallying during global booms as Australia exports raw materials, and falling during recessions as mineral prices slump or when domestic spending overshadows the export earnings outlook.
The Australian dollar is a reserve currency and one of the most traded currencies in the world.
THE RAND AND WHERE IT IS USED
The rand is legal tender in the common monetary area between South Africa, Eswatini, Lesotho and Namibia, although the last three countries have their own currencies attached to the rand’s value. Before 1976 the rand was legal tender in Botswana too.
ORIGIN OF THE WORD RAND
The rand got its name from the Witwatersrand (English “white waters’ ridge”), the ridge upon which Johannesburg is built and where most of South Africa’s gold deposits are mined.
DENOMINATIONS, ABBREVIATIONS, VALUATIONS OF THE RAND
When referring to the currency, the abbreviation is usually upper case “R”, but the name is written “rand” in lower case in both English and Afrikaans.
The rand is subdivided into 100 cents (sign: “c”) and its ISO 4217 code is ZAR, from Zuid-Afrikaanse rand (South African rand); the ZA being a historical relic from Dutch and not used in any current context except the country abbreviation.
HISTORY OF THE SOUTH AFRICAN RAND AS CURRENCY
As a trading centre, multiple currencies circulated throughout South Africa, with the first official currency used the Guilder. During the late 17th century, the Rixdollar was used, the first South African currency to include paper notes.
The Reserve Bank of South Africa was established as the central bank in 1921 and on 14 February 1961, three months before the Union of South Africa became a republic, the rand was introduced as its official currency. It replaced the South African pound as legal tender, at the rate of two rand to one pound, or 10 shillings to the rand.
Coins were introduced in 1961 in denominations of 1⁄2, 1, 21⁄2, 5, 10, 20, and 50 cents, the smaller ones later discontinued. The 2-rand coin was introduced in 1989, followed by 5-rand coins in 1994. To curb counterfeiting, a new 5-rand coin with more security features was released in 2004. The first series of rand banknotes introduced in 1961 was in denominations of 1-, 2-, 10-, and 20-rand.
In 1966, a second series was released. All notes bore the image of Jan van Riebeeck. A 1978 series began with denominations of 2-, 5-, 10- and 20-rand, with a 50-rand introduced in 1984. The 1-rand note was replaced by a coin.
In the 1990s, the notes were redesigned with images of the Big Five wildlife species and coins were introduced for the 2- and 5-rand. In 1994, 100- and 200-rand notes were introduced. In 2012 a new set of banknotes bearing Nelson Mandela’s image was issued.
SOUTH AFRICAN RAND RATES AND A CURRENCY CONVERTER.
Most currency rankings show that the most popular South Africa Rand exchange rate is the USD to ZAR rate.
BRIEF EXCHANGE RATE HISTORY OF THE RAND
The rand has developed into a liquid emerging market currency, most commonly traded against the US dollar. Despite originally enjoying strong value in the ever-changing international economy, the system of Apartheid in South Africa ultimately caused the rand to lose footing on the global market.
From the time of its inception in 1961 until late in 1971 one rand was worth US$1.40. thereafter its value fluctuated as various exchange rate dispensations were implemented by the South African authorities. In 1974 the South African authorities delinked the rand from the dollar and introduced a policy of independent managed floating. At the time it was trading at 87 cents to the dollar.
Several factors however affected the exchange rate. By the early 1980s, high inflation and mounting political pressure and sanctions due to international opposition to the apartheid system, had started to erode its value. By 1985 it had weakened to R 2.40 per dollar, recovered somewhat between 1986–88, but by the end of 1989, was trading at more than R 2.50 per dollar. By the 1994 general election it had weakened to over R 3.60 to the dollar and by 1999 to over R 6 to the dollar. The rand/dollar exchange in the post-apartheid South Africa had been largely impacted by national and international social, political and economic events.
The controversial land reform programme of Zimbabwe, followed by the September 11, 2001 attacks, sent it to R 13.84 to the US dollar in December 2001.
This sudden depreciation led to a formal investigation, in turn leading to a dramatic recovery but in 2006 resumed its downward slide. In January 2014, the rand slid to R11.25 to the US dollar and over a four-day period in December 2015, it dropped over 10% due to a surprise replacement of then Finance Minister Nhlanhla Nene with the little-known David van Rooyen. This further damaged international confidence in the rand, causing an all-time low of R 17.9169 to the US dollar on 9 January 2016.
In 1983, the apartheid government abolished the financial rand exchange rate system and key international banks refused to renew credit lines for South Africa, which forced the temporary closure of the foreign-exchange market in the country.
BRIEF EXCHANGE RATE HISTORY OF THE AUSTRALIAN DOLLAR
AUD TO RAND
On 26 January 2020 one Australian dollar exchanged for 9,82 South African Rand and for one South African Rand one could get 0,10 Australian dollar. The previous 180 days of AUD ZAR historical data (from Tuesday 30/07/2019 to Friday 24/01/2020) the highest maximum rate was 10.452 ZAR for one AUD on 19 Aug 2019, an average of 10.074 ZAR for one AUD over this period and the lowest rate 9.7411 ZAR for one AUD on 08 January 2020.