President Jacob Zuma said on Thursday his government was discussing the rand’s current level, which some analysts say is too strong and hampering export growth, but no decision has been made on whether to take any action.
“These matters are always discussed. It’s a matter we are discussing. Even economists don’t have one view,” Zuma told a news conference after a major Cabinet meeting. He made clear that no decision on the currency had been taken either way.
The Organisation for Economic Cooperation and Development (OECD) stirred up debate this week about the rand, which has rallied nearly 30% in the past year, by saying South Africa should consider weakening the currency to boost exports.
“South Africa should do more to resist waves of real appreciation of the rand associated with surges in private capital inflows, which are largely driven by investor sentiment towards emerging markets in general, and commodity plays in particular,” the OECD said in a report on South Africa.
Volatility
Unions and some producers have called for the government to take steps to weaken the rand, which is considered relatively strong at current levels of about 7,60 to the dollar. The currency has benefited from rising risk appetite and a rebound in commodity prices, which have spurred capital inflows to South Africa.
South African Reserve Bank Governor Gill Marcus has said the rand’s volatility makes planning difficult, but the central bank has also said it would not target a level for the currency.
Asked on Monday to respond to the OECD’s recommendation for more aggressive moves to cap rand strength, Finance Minister Pravin Gordhan said the government would allow central bank intervention in the market when affordable.
Zuma’s year-old administration is in the middle of a root-and-branch review of the economy as it seeks to tackle chronic unemployment, running officially at 25% but in reality probably much higher, which is limiting the country’s growth compared to other emerging markets. — Reuters