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In collaboration with Dr Robert Hancké of the London School of Economics, the UK’s No. 1 retail forex provider,1 IG, has considered...
Breakaway region Western Cape
Parent country South Africa
Old currency South African Rand (ZAR)
New currency Cape Rand
Creating its own currency would allow the Western Cape to heighten existing economic advantages: but at what cost to the rest of South Africa?
An independent currency could allow the region to position itself as a base for higher value-added manufacturing
Depreciation of the new currency could allow the province to protect new industries while they gain a foothold in global markets
It is unclear how South Africa would cope with losing a region that is both critical to its economy and home to all its major governmental institutions
Such a dramatic change to the political and economic status quo would likely have huge ramifications throughout the country, and beyond
Change in value of South African rand (ZAR) since 2000, based on SDRs per currency unit source
Dr Robert Hancké
“Losing the wealthiest and politically most significant part of the country would be a devastating blow for South Africa.”
Since South Africa would effectively lose its administrative, judicial, scientific and political centres, a complete disintegration of the South African political economy cannot be excluded
A declaration of monetary sovereignty by the Western Cape would almost certainly lead to conflict with the other provinces in South Africa
Since the South African rand is not a strong currency (it has halved in value against the dollar since 2010), the gains from an independent currency would likely be very small for the Western Cape
Dr Robert Hancké is an Associate Professor of Political Economy at the London School of Economics. His research interests include the political economy of advanced capitalist societies and transition economies as well as macroeconomic policy and labour relations.