Discuss why a South African exporter of wine would welcome a weakening of the rand relative to the dollar€”but such a depreciation may not be ideal...

A South African exporter who sends wine to
the United States will make more money as the rand weakens because he receives payment in US
dollars. For instance, $1 now is worth approximately 15 rand. An exporter who sells a shipment
of wine for $10,000 will be able to convert this, subject to bank fees and charges, into 150,000
rand. However, if the rand drops in value so that there are 20 rand to the dollar, the exporter
receives 200,000 rand for the same shipment, without having to increase prices or change
anything.

However, the same drop in the value of the rand would harm
importers just as it helps exporters. The importer who formally had to pay 150,000 rand for a
shipment now has to pay 200,000 for the same import. Moreover, people who are not directly
involved in such businesses are also adversely affected. Tourists who go to the US, for
instance, will find it much more expensive to do so.

For the sake of
simplicity, this example refers to direct trade between the South Africa and the United States;
however, since the US dollar is the strongest global reserve currency, a depreciation of the
rand against the dollar is likely to cause it to fall against other currencies and affect other
markets.