Improved competition would also create more jobs and curb inflation, raising the living standards of the poor, he said.
Trade unions and some senior members of the African National Congress have been lobbying for changes to the official policy of allowing markets to determine the exchange rate of the rand.
The unit was at R7,39/ late yesterday, a level Strauss-Kahn said was probably at the “strong end” of a manageable range.
Sustained rand strength has fanned fear about the competitiveness of local exports, which are leading SA out of recession.
Strauss-Kahn’s remarks coincided with a statement yesterday by Finance Minister Pravin Gordhan, who said a report would be released “in the next month or two” on the outcome of an investigation into the spread between the Reserve Bank’s repurchase rate and prime lending rates set by commercial banks.
The difference has been kept consistent between the four main banks and steady at 3,5 percentage points for the past few years. Before he retired last year, the Bank’s former governor, Tito Mboweni , initiated an inquiry into the practice, saying a bit of “competition” was needed.
Otherwise, Strauss-Kahn applauded SA’s economic policies, saying its response to the global financial crisis was “appropriate and timely”. A fiscal stimulus of about R800bn and lowering interest rates by five percentage points had helped to protect the country from the fallout of the global downturn, he said.
Strauss-Kahn also said inflation targeting — another controversial topic for trade unions — was appropriate for an economy such as SA’s. “It’s a policy which has to be taken with some flexibility,” he said, echoing comments by Gordhan in the national budget last month.
The Reswerve Bank has repeatedly said it takes account of a range of other factors, including growth and employment, when setting interest rates. But its official mandate is to keep inflation inside a 3%- 6% target range.
Source: Business Day
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