No U-turn on currency by Manufacturing Circle
Last week's Agent Provocateur column in the M&G stated that the Manufacturing Circle had done a "U-turn" in respect of its monetary policy.
But the Manufacturing Circle's monetary policy has not changed. It still firmly supports a competitive and stable rand as a driver of manufacturing growth.
A survey of the coverage of the press conference at which we released our 2012 fourth-quarter survey results, plus conversations with numerous speakers, suggests that a reply to a question from Business Day, that the weaker rand is providing a "breather" to manufacturers in the face of a host of other domestic challenges, might have triggered the misunderstanding.
The article also mistakenly assumes:
- A 2010 call for a currency band of R9/$1 to R10.50/$1 by Cosatu as a formal Manufacturing Circle position, on which we have since supposedly vacillated;
- An acknowledgement that the weakening of the currency may lead to some interim inflation as an argument against the rand trading at more competitive levels for the sake of exports; and
- The Manufacturing Circle's support for a strong domestic market as a base from which to maintain and strengthen our export capacity as a change in its view on the importance of exports as a way to grow manufacturing, thus implying a swing away from the importance of a competitive currency as supportive of manufacturing growth.
We have consistently argued in favour of a competitive and stable rand. We believe this should be pursued through a review of monetary policy, which should consider a host of policy tools as well as inflation targeting. They could include the adoption of a periodically reviewed currency band, the use of capital controls and macro-prudential regulation. Consensus among our members suggests that, in current conditions, such a band should be between R8.50/$1 and R9.50/$1.
What we have never done is to argue that a more competitive and stable currency is a panacea for manufacturing or export growth.
For that, we have far too many domestic policy challenges.
The erroneous conclusions outlined above have unfortunate consequences, deepening the ignorance of those who disregard manufacturing as a high-multiplier sector that can provide many quality jobs. – Coenraad Bezuidenhout, executive director, Manufacturing Circle