Ministry denies rand 'freeze' report

The Economic Development Ministry on Thursday denied a report that it planned to “freeze” the rand currency, which had added to fears of a policy shift, weakening the rand.

“We have absolutely no idea about this [report]. We are [as] surprised as anybody else,” said the ministry’s spokesperson Zubeida Jaffer.

On Thursday, the rand touched a three-week low of 7,5401 against the dollar, about 1,5% weaker for the session, with investors growing wary of signs policy may be shifting to the left.

Sake24, the website of leading newspaper group Naspers, reported earlier that Ebrahim Patel, the Minister of Economic Development, was planning to propose “radical” economic policy adjustments that included a proposal to freeze the rand at a predetermined exchange rate.

The rand has gained about 25% against the dollar so far this year, raising concerns that its impact on exporters could delay an economic recovery from the country’s first recession in 17 years.

Jaffer said she did not know Patel’s views on the recent strength of the rand.

President Jacob Zuma has made some changes to the way Cabinet operates, while the resignation this week of Joel Netshitenzhe, a senior policy maker who was seen to be one of the architects of market-friendly policies, has fuelled worries that more left-leaning officials were gaining prominence.

A former trade unionist, Patel was appointed to the Parliament’s economic cluster while Trevor Manuel, who is the minister in charge of the national planning commission and widely respected by foreign investors, was left out.

Asked about speculation that Patel was working with South African Communist Party (SACP) head Blade Nzimande on proposals for policy change, Jaffer said: “I’ve got no knowledge of that.”

“The minister [Patel] is working closely with the Minister of Finance Pravin Gordhan and the Minister of Trade and Industry Rob Davies on all these matters and reporting to cabinet. Cabinet is working as a team.”

Peter Attard Montalto, emerging market analyst at Nomura International said: “We discount these reports as having no real chance of being enacted.
This would fly totally against the economic policy ethos of the [South African Reserve Bank] and the National Treasury.

Although Reserve Bank Governor Tito Mboweni has expressed concerns about the recent strength of the rand, he has repeatedly said the level of the exchange rate would be left to the market to set.—Reuters

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