Yesterday South Africa’s three major trade union federations and a number of large local manufacturers signed a joint declaration calling for “interventions to ensure an appropriately valued, competitive and stable currency”. Congress of South African Trade Unions Secretary General Zwelinzima Vavi said yesterday that a competitive currency was needed in South Africa in order to allow domestic manufacturers to compete on a similar footing to that of other countries.
Vavi also called for a further reduction in real interest rates along with the introduction of concessional financing for productive investment.
It remains an open question as to what the “correct” level for the currency that would satisfy both exporter and importer concerns would be.
Furthermore, volatility in the rand is also something that is extremely difficult to control, given that it largely takes its direction from global forces. A competitive and stable exchange rate could, therefore, be complex and costly to manage, both in terms of sterilising the currency and the broader inflationary implications of a weaker currency for inflation, which is effectively a tax on the poor.
Broader competitiveness issues in the SA’s economy need to be looked at rather than just rand-specific issues. This requires a broader policy response that takes account of a host of structural competitiveness challenges the country faces. Therefore, we continue to see a relatively low probability of significant changes to SA’s exchange rate policy, despite the noise which is likely to continue to emanate from labour and business.
Source:
ABSA Bank
No comments:
Post a Comment
Have your say!