South Africa, one of the emerging market's biggest success stories in recent years, is rapidly becoming a canary in the coalmine known as the commodities washout.
A deepening tumble in commodity prices — a fast moving train wreck that's been barreling down the tracks of the global economy since last year — has been linked directly to China's economic slowdown. For the first time in nearly a decade, investors are yanking more money out of emerging markets than they are putting in, a new report from the Institute of International Finance stated on Friday.
With the emphasis being on China and other Asian countries, investors have largely ignored developing economies such as South Africa, the continent's second-biggest economy and one highly dependent on natural resource demand. Sub-Saharan Africa is a net exporter of primary commodities, according to the World Bank, which becomes a mixed blessing when major markets that account for much of global demand stagnate or fall into outright recession.
Meanwhile, South Africa is becoming an exponent of the sell-off hammering global markets. Tumult in the world economy—and the G20 country's own structural challenges—recently sent its currency, the rand, to a record low. The rand's swoon is part of what Bernd Berg, a portfolio manager and strategist with Societe Generale, recently called an "unprecedented" tumble in emerging market currencies.