CAPE TOWN, Apr 19 – South Africa\’s strong currency is uncompetitive and hurting the country\’s exporters and local producers, Trade Minister Rob Davies said Tuesday.
"There\’s a consensus that at this level, where the rand is now, the rand is uncompetitive and is having a detrimental effect not only on exporters but also on local producers who are suffering unfair competition from imports," he said.
South Africa\’s rand has made massive gains against the weak US dollar, currently trading at about 6.84 rand, compared to a low of 11.07 during the global financial crisis in 2008.
The country\’s benchmark interest rate — currently at 5.5 percent — is also attracting strong capital inflows from developed nations.
"It\’s caused by loose monetary policy in the developed world, an attempt to stimulate economies not through fiscal means but through monetary policy means, short-term capital finding its way into cross border trade," said Davies.
"We even had some discussion about this in the BRICS. It\’s a serious issue. Different countries have tried different things and I think there is a huge debate in South Africa about whether we should try some new things or not."
Leaders of the BRICS group — Brazil, Russia, India, China and South Africa — warned last week that emerging economies were threatened by large capital flows which have been blamed for pushing up their currencies.