A recent Break Away Currencies study identified the Western Cape as the most plausible province in South Africa to develop its own currency.
IG Group and the London School of Economics released a test case on the reason and possible implications of the Cape adopting a new unique money.
Why is the Western Cape eligible for its own currency?
1. The province has the most economically developed region in SA
2. It has the highest regional GDP’s per capita
3. The South African rand is used in both developed and developing regions of SA
4. The Western Cape is not reliant on mineral resources that follow global commodity cycles like diamonds, gold or coal
5. It is the most administratively and politically developed in sub-Saharan Africa
6. It has the largest share of non-resource-based exports in SA
7. The educations system is very good and the province is home to the countries best universities.
The Western Cape’s GDP per capita is second only to Gauteng.
If the Cape were to create its own currency it would surely heighten its economic advantages but this could also negatively affect the rest of South Africa.
Benefits of Developing the Cape Rand:
1. Developing an independent currency could allow the region to position itself as a base for higher value-added manufacturing
2. Depreciation of the said currency could allow the province to protect new industries while they gain a spot in global markets
Possible Negative Results:
1. South Africa could not cope with losing a region that is both critical to its economy and home to all its major governmental institutions
2. A dramatic change to political and economic status could likely cause huge waves throughout the country and possibly the world
The rand has had many ups and downs throughout the years, proving it is not a strong, stable or reliable currency, here are the trends:
The ZAR’s value has halved against the dollar since 2010, because of this the gains from an independent currency would likely be very small for the Western Cape.
In the instance that the Cape does create its own currency, South Africa’s administrative, judicial, scientific and political centres would dissolve.
On top of this a monetary sovereignty by the Western Cape would almost certainly lead to conflict with other provinces.
Pictures: Pixabay/GI Group