The South African rand has been a star performer amongst major EM currencies so far this year, but we think that it will suffer one of the biggest losses against the US dollar by year-end. Meanwhile, South Africa is suffering from a renewed rise in COVID-19 cases and another slow response from policymakers would risk renewed strains on the health system and the need for tighter restrictions, keeping activity depressed. Adding to the downside risks facing the economy, plans to secure emergency power are at risk of being derailed. Poor rains mean that power problems are also afflicting Côte d’Ivoire and Ghana and disrupting the processing of key cocoa exports.
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