Just a few weeks after tapping its best exchange rate versus the greenback in 2023, the South African rand fell to a new 2023 low of 18.636 local currency units for every dollar on March 7. South Africa’s power shortages as well as the country’s recent grey-listing by the Financial Action Task Force (FATF) are believed to be fueling the rand’s slide.

10-Hour Power Outages

The exchange rate of the South African rand versus the U.S. dollar recently plunged to a new 2023 low of 18.636 units for every dollar on March 7, 2023, the latest data has shown. Before the latest plunge, the rand soared to 16.721 per dollar on Jan. 12, 2023, the currency’s best performance since the start of the year.

However, since then, the rand has depreciated by almost 10% making it one of the worst-performing African currencies in 2023. According to reports, the rand’s slide is blamed on South Africa’s unending electricity woes which have seen many homes and businesses go for more than 10 hours without power.

The debilitating blackouts have since prompted South African president Cyril Ramaphosa to appoint the country’s first minister of electricity. Besides dealing with the crippling power cuts, president Ramaphosa said the new minister, Kgosientsho Ramokgopa, is expected to help facilitate the coordination of entities that are working towards finding a solution.

“The Minister will be expected to facilitate the coordination of the numerous departments and entities involved in the crisis response, work with the Eskom leadership to turn around the performance of existing power stations, and accelerate the procurement of new generation capacity,” president Ramaphosa reportedly said.

Meanwhile, some South African commentators have argued that the recent addition of South Africa to the Financial Action Task Force (FATF)’s greylist could be one of the reasons why the rand has recently performed poorly against major global currencies.

At the time of writing (4:10 p.m. EST, March 10), the rand-to-dollar exchange rate stands at just under 18.6 units per greenback.

Register your email here to get a weekly update on African news sent to your inbox:

What are your thoughts on this story? Let us know what you think in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Growing shortages of foreign exchange on the interbank market have reportedly forced the Central Bank of Kenya to ask financial institutions to ration dollar purchases by Kenyan businesses. The shortages have forced Kenyan firms to seek greenbacks on alternative markets where the exchange rate is higher than the official government rate.

New Limits Curtailing Operations of Kenyan Firms

Kenya’s ongoing foreign exchange shortages have reportedly forced the Central Bank of Kenya (CBK) to instruct financial institutions to impose caps on the amount of forex that businesses and individuals can purchase. According to a Business Daily report, some financial institutions have imposed caps as low as $5,000 per day. The imposed limits make it difficult for Kenyan manufacturers and importers to meet their obligations.

The shortages, which reportedly began in mid-2022, suggest that the country’s foreign currency woes are worsening. In October of that year, a CBK statement denied Kenyan Deputy President Rigathi Gachagua’s claims that the country lacked foreign exchange to import oil. The central bank insisted at the time that all the forex used for oil imports is sourced from commercial banks.

Despite the CBK’s contention that the country had sufficient foreign reserves, an unnamed executive with a local manufacturing company suggested that the situation is getting worse.

“We are now scavenging for dollars. Only half of every six banks we call daily for dollars will have something for us. Three of the banks will ask us to check later,” the executive said.

The executive added that while some fortunate businesses have secured as much as $50,000, these funds are still far below what they need.

Kenya’s Declining Foreign Exchange Reserves

Meanwhile, the report suggested that top Kenyan firms are now sourcing dollars from forex-rich firms such as those in the hospitality and aviation industry. Also, instead of using the official exchange rate of 127.39, the firms are reportedly using a higher rate of 137 shillings for every dollar.

Some Kenyan commentators have attributed the dollar shortages to tough rules introduced by the CBK that targeted illegal forex dealers. The commentators insist that the tougher rules have crippled the operations of the foreign exchange interbank market.

However, the CBK governor, Patrick Njoroge, is quoted in a January Reuters report asserting that Kenya has adequate reserves. Njoroge made the remarks after it was revealed that Kenya’s foreign exchange reserves had fallen below the statutory requirement of four months of import cover.

Register your email here to get a weekly update on African news sent to your inbox:

What are your thoughts on this story? Let us know what you think in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

According to an analysis of Google searches by Leverage Trading, Nigeria is the “second-highest country in the world for searches related to crypto leverage.” Along with South Africa and Ghana, the West African nation also dominates searches for the term “trade crypto.” Regulators and consumer protection agencies must “provide greater safeguards against predatory practices,” according to a spokesperson for Leverage Trading.

Leveraged Trading and the Risks

Nigeria had the second-highest score (94) globally for searches related to crypto leverage in the past five years, the latest analysis of Google searches conducted by Leverage Trading has shown. According to the analysis, Singapore (100) is the only country that outscored the West African nation when it came to searches “with an emphasis on transactional searches such as ‘how to leverage trade crypto.’”

On the other hand, the analysis shows that Nigeria, along with South Africa and Ghana, dominate Google searches for the term “trade crypto.” When compared with similar searches by U.S. residents, Leverage Trading found that Nigerian searches were four times higher.

According to Investopedia, leveraged trading is the “use of borrowed funds to increase one’s trading position beyond what would be available from their cash balance alone.” While this form of trading can potentially amplify a trader’s profits, it can similarly amplify losses, hence it is not recommended for the inexperienced.

Regulators Told to ‘Provide Greater Safeguards’

However, despite this, African traders are seemingly unperturbed by risks that are associated with leveraged trading. Commenting on the findings which show that Africa has a disproportionately large share of the total global searches for leveraged investment products, a spokesperson for Leverage Trading said:

As technology continues to advance, it is becoming increasingly easier for individuals in emerging markets to access high-risk financial products like leverage trading. While these products can offer the promise of wealth creation, the reality is that they can also lead to devastating losses that perpetuate the cycle of poverty. The risks associated with high leverage and potential losses cannot be overstated, and it is crucial that individuals fully understand these risks before engaging in leverage trading.

The unnamed spokesperson added as financial firms increasingly target individuals in poorer countries, regulators and consumer protection agencies must “provide greater safeguards against predatory practices.”

Meanwhile, from the analysis of searches for different forms of leveraged trading, Leverage Trading found that while Africa is dominant in many leverage trading-related searches, the continent lags behind when it comes to searches for the term “stock leverage.” According to the analysis, this category is dominated by Singapore, Hong Kong, and the United Arab Emirates.

Register your email here to get a weekly update on African news sent to your inbox:

What are your thoughts on this story? Let us know what you think in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.