In recent times, the rand has strengthened to “way beyond desirable levels”, according to South African Deputy President Phumzile Mlambo-Ngcuka.
Addressing the media in Parliament on Monday regarding the government’s Accelerated and Shared Growth Initiative (Asgi), Mlambo-Ngcuka said the country’s recent growth, although welcome, has been “unbalanced” and based on strong commodity prices, strong capital inflows and strong domestic consumer demand that have increased imports and “strengthened the currency way beyond desirable levels”.
Despite this growth, levels of unemployment are still too high, and growth has not been adequately shared, she noted.
Further commenting on the rand, Minister of Trade and Industry Mandisi Mpahlwa explained that part of Asgi involves examining currency issues and “whether the rand is enabling us to achieve some of the goals we have on the economy”.
This includes moving the economy fundamentally and expanding its base so that it is not unduly influenced by such things as the fortunes of commodity prices.
“So, examining the currency is assisting us in our goals,” he noted. “One of the worrying trends has been the high level of consumption, as lots of demand is being met by rising imports — our balance-of-payments situation is changing from what it has been in recent years.
So, while it [the rand] is not an easy issue to deal with, we will remain seized with it — it is not an area with easy answers, but we will try to find ways best to manage it.”
The rand was weaker in late-morning trade on Monday following Mlambo-Ngcuka’s comments. A softer euro was also weighing on the local unit.
At 11.39am, the rand was bid at R6,1190 per dollar from Friday’s close of R6,0544. It was bid at R7,3396 to the euro from a previous R7,2995 and at R10,7280 against the sterling from a previous R10,6557.
The euro was bid at $1,1982 from $1,2030 late on Friday, while gold was quoted at $569,70 a troy ounce from a previous $567,55/oz.
“The rand is weaker mainly on the deputy president’s comments,” a currency trader said. “But it is still very much in ranges and it will have to break above R6,18 to change this.”
He continued that prior to the deputy president’s remarks, the rand had been expected to trade in a R6,08-to-R6,13 range.
However, Mlambo-Ngcuka’s remarks, coupled with the euro weakening below $1,20, had forced the rand back to resistance levels.
If R6,13 to R6,14 broke, R6,18 would be the next target, the trader concluded. — I-Net Bridge