Gordhan’s medium-term budget policy statement

Finance Minister Pravin Gordhan announced bold steps to stem the appreciation of the rand yesterday, and forecast a series of smaller than expected budget deficits despite political pressure for higher spending.

Part of an almost R30bn tax revenue overrun this year would be used to build foreign exchange reserves while exchange controls were eased, both for individuals and companies, he said.

The news knocked the rand 1,7% weaker to R7,07 against the dollar, erasing some of the hefty gains over the past year which threaten the economy’s recovery.

Gordhan: SA cannot go it alone on currency

SA could not solve the problem of a rapidly appreciating currency on its own, Finance Minister Pravin Gordhan warned yesterday, in a pointed rebuff of calls for unilateral action to curb the rise in the rand.

And he warned that unless a global solution was found to the problem of appreciating emerging-market currencies, the world’s economy could be plunged into a “currency war”.

As the rand reached a new two- and-a-half-year high at R6,76/$ yesterday, Mr Gordhan said SA’s “mining, agricultural and manufacturing sectors are all finding themselves in serious trouble”.

Gordhan: Clarification of the Reserve Bank's mandate

The letter concerning the Clarification of the Reserve Bank's mandate to Reserve Bank Governor from Finance Minister, Pravin Gordhan, on 16 February, does not indicate a change to the SARB’s mandate. 

It appears that the Bank will contnue to target inflation while also taking into account growth and employment dynamics.

An extract from the letter is provided:

... As we move into the new fiscal year, I thought it important to reiterate the constitutional mandate of the South African Reserve Bank and indicate how the lessons of the recession and the reality of the aftermath should be taken into account:

1. Section 224 of the Constitution of the Republic of South Africa states:

(1) The primary objective of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic.

(2) The South African Reserve Bank, in pursuit of its primary object, must perform its functions independently and without fear, favour or prejudice, but there must be regular consultation between the Bank and the Cabinet member responsible for national financial matters.