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Rand: It’s not all bad news

George Herman says the rand’s beating is 'bitter medicine' that’s good for the economy in the long run.

FILE: On Monday afternoon the rand was at 13,27 to the US dollar and 15,22 to the euro. Picture: Reinart Toerien/EWN.

JOHANNESBURG - Head of South African Portfolios at Citadel, George Herman, says the adjustment in the currency is the bitter medicine that is good for the economy in the long run.

The rand has plunged amidst concerns that dropping commodity prices will deepen as China's economy slows.

On Monday afternoon the rand was at 13,27 to the US dollar and 15,22 to the euro.

Herman admitted it is bad news for consumers.

"Nobody is escaping this but they are exaggerating these moves because the Chinese market has been slowing down for a long time. Over the last seven years the Chinese growth has come down from 14 percent to seven percent so why is that a big deal now?"

He added the adjustment in the currency wasn't all bad news.

"In the long term, it's good for our economy. It'll help us stimulate the economy and export so it's not necessarily a bad thing as long as it happens at a slow pace."

Herman said it was completely possible for the rand to go back to a single digit because South Africa's credit balance has started improving and the current deficit had started decreasing.

"So once all of this calms down, there is a good chance the rand could go back to a single digit."

LISTEN: George Herman dissects the state of the currency.