While the rand has depreciated a lot over recent decades, South Africa’s real effective exchange rate (i.e. weighted across trading partners) has been much more stable. This is because our inflation has been higher than in our trading partners. Had our inflation been lower, the relative price of South African goods compared with foreign goods would have fallen more, which would have boosted our competitiveness.
Footnote
Note that a decrease in the effective exchange rate represents depreciation.
