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Currency value impacting trade and competitiveness
South Africa to debate impact of rand strength-minister
Labour, companies to discuss rand strength
November 6, 2009
South Africa's economic development ministry has agreed to hold discussions with trade unions and companies on the impact of a strong rand on the economy, a government minister said.
The rand has gained around 20 percent against the dollar and firmed sharply against other currencies this year, making it one of the best performing emerging market currencies.
The central bank and finance ministry has warned that its relative strength could harm sectors of the economy with the country already in its first recession in nearly two decades.
The government has reiterated, however, that while it wants a stable and competitive currency, it is committed to a free floating exchange rate set by the market.
"Private sector representatives and trade unionists have met with my ministry to convey their concerns of the impact of the rand on their businesses and on workers," Ebrahim Patel, Minister of Economic Development, said in a written reply to a parliamentary question.
"We agreed that there is value in a policy platform that we will convene with economists and social partners to dialogue further on this matter," he said.
Labour federation COSATU has called for action to weaken the rand, while companies have also complained its strength is impacting their businesses.
A recent media report saying Patel, a former trade unionist, was proposing to "freeze" the rand briefly spooked investors before being denied.
The trade union and communist party allies of the ruling ANC are pushing for Patel to be given more influence in setting economic policy, as they try to shift government towards a more leftist policy stance.
Labour federation COSATU hopes President Jacob Zuma will be more amenable to their thinking after backing him for the leadership of the African National Congress.
This has created tension within cabinet and investor concerns about a possible shift in policy.
Patel said since January the rand had strengthened sharply against US dollar and Chinese currency.
"The impact of this is significant ... we have become about 15 percent more expensive in our exports and imports are 15 percent cheaper from these two trading partners," he said.
The trade unions are also pushing for inflation targeting to be scrapped and for the central bank's mandate to widen to also include employment and growth rather than just targeting inflation. - Reuters
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