ECONOMY
Govt will not set rand
Posted Wed, 16 Nov 2005
Government will not set the rand artificially, Deputy President Phumzile Mlambo-Ngcuka affirmed on Tuesday.
Responding to a question on exchange rates in the National Council of Provinces, she said the issue of a strong rand versus a weak rand was an academic debate.
"(This is) because we do not have control — the market decides the strength of the capital.
"We have taken a decision as government that we will not set the rand artificially, but we... are wanting to increase our reserves so that in that way we make sure we strengthen our position.
"What we want to achieve in South Africa is a stable rand, that is not volatile... so that exporters can plan realistically," she said.
Some exporters had developed their business models on the basis of the rand remaining weak, but the economy and currency had strengthened, and now they were struggling to adapt.
She warned that business plans needed to be "premised on a rand that is strong,
and a more optimistic outlook about our economy".
On exchange control, Mlambo-Ngcuka said the market had been looking for a "big bang" approach to dropping this.
However, "the approach of the Treasury has been very systematic and careful because... they do not want to create a situation where there will be capital flight".
However, with the slow relaxation of exchange control this had not happened.
"People have realised that doing business and keeping your money in South Africa is actually very good business.
"Our country has been rated higher by all the rating agencies, and therefore people's intentions to take money out of the country have turned out to be people's intentions to bring money back into South Africa."
The little that was left in the form of exchange controls was "neither here nor there", Mlambo-Ngcuka said.
Sapa
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