Rand weakness is not the solution to the competitiveness of the local manufacturing sector, suggested Adrian Saville, chief investment officer at Cannon Asset Managers, on Wednesday.
|||Rand weakness is not the solution to the competitiveness of the local manufacturing sector, suggested Adrian Saville, chief investment officer at Cannon Asset Managers, on Wednesday.
Speaking at an Economic Outlook 2011 conference hosted by the Gordon Institute of Business Science, Saville said that, when inflation adjustments were factored in, manufacturing was not as influenced by the rand.
“Including inflation takes the rand from being the single factor that matters to arguably a footnote, it is certainly not an overwhelming factor in the manufacturing sector,” said Saville.
There have been calls by some to weaken the rand to help local exports become more competitive. The government's New Growth Path document also proposes a weaker currency and loose monetary policy.
The rand has been stronger, especially for most of 2010, along with other emerging-market economy currencies on the back of strong capital inflows.
Although a burden for manufacturers, the rand has brought some relief to consumers by helping keep inflation in check and offsetting what could have been steeper fuel-price increases in recent months.
“Don't weaken the rand. The [recent] petrol-price hike, can you imagine what that would've looked like had the rand been at the level that some are advocating for,” said Rudolf Gouws, an economic consultant for Rand Merchant Bank, at the conference.
Saville suggested that the competitiveness of SA's exports also depended on how well its trading partners performed. - I-Net Bridge
Source: http://www.iol.co.za/weak-rand-no-solution-1.1017393
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