Rand Unlikely to Return to Previous Levels Soon: Davies

The rand is unlikely to rebound “anytime soon” to the stronger levels seen a few years ago, South African Trade and Industry Minister Rob Davies said.

The currency has lost 17 percent of its value against the dollar this year, the worst performer among 16 major ones tracked by Bloomberg, after reaching 6.5686 in April 2011. The rand slumped to a six-week low of 10.1717 per dollar today and was trading at 10.1677 as of 12:44 p.m. in Johannesburg.

While the currency’s depreciation may add to rising costs, it may boost the competitiveness of manufactured exports, Davies said. Factory output, which makes up about 15 percent of Africa’s largest economy, grew at the slowest pace in three months in June, expanding 0.4 percent from a year earlier, the statistics office said on Aug. 8.

“The depreciation of the rand, in our estimation, presents a number of opportunities, both for exporters as well as for manufacturers that are competing against a surge of imports,” Davies told reporters in Johannesburg before the start of a two-day meeting of business executives from Brazil, Russia, India, China and South Africa.

The Department of Trade and Industry wants manufacturers and exporters to “seize the opportunities and try to take advantage of the new climate that is now being created”, Davies said. “The rand is now more competitively priced, albeit in a context of volatility.”

The central bank cites the rand’s depreciation as one of the biggest risks to inflation, which it forecasts will exceed the 3 percent to 6 percent target band this quarter. Data released by the statistics office on Aug. 21 may show the inflation rate reached 6.2 percent in July, according to the median estimate of 20 economists surveyed by Bloomberg.

“The concern, of course, is that we still face volatility in the currency, and volatility coming also at a time when there are rising oil prices,” Davies said.

To contact the reporter on this story: Rene Vollgraaff in Johannesburg at rvollgraaff@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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