The rand’s almost 20 percent plunge against the dollar this year is already benefiting some South African exporters, improving the competitiveness of the economy, Finance Minister Pravin Gordhan said.
“Some say they are in a better position to export now than they used to be and they have got better order books than before,” Gordhan said in an interview at a mining conference in Johannesburg yesterday. “Some are taking advantage of the weaker rand.”
The currency’s depreciation, the most against the dollar this year among the 16 major currencies tracked by Bloomberg, may help to ease pressure on an economy that’s set to expand at its slowest pace since a 2009 recession. At the same time it’s adding to pressure on inflation, which accelerated to 6.3 percent in July to exceed the Reserve Bank’s 3 percent to 6 percent target band for the first time in 15 months.
With a weaker rand boosting import costs, including gasoline prices, “how you keep the balance is part of the difficult task that we have,” Gordhan said.
South Africa imports about 70 percent of its crude oil needs, with the rest of its requirements met with gasoline and diesel made from locally mined coal.
The rand gained 0.1 percent to 10.3820 against the dollar as of 10:12 a.m. in Johannesburg.
The Pretoria-based Reserve Bank has kept its benchmark repurchase rate at 5 percent for more than a year as it juggles faster inflation and sluggish economic growth. Violent strikes in the mining industry and a decline in export demand from Europe limited growth in Africa’s largest economy to 2.5 percent last year. The bank is forecasting expansion of 2 percent in 2013.
While gross domestic product expanded an annualized 3 percent in the second quarter, according to data published by the statistics agency yesterday, output may come under pressure amid a wave of strikes that began this month.
Carmakers, including Toyota Motor Corp. and Volkswagen AG, have idled plants since Aug. 19 as about 30,000 workers downed tools to demand higher pay. The National Union of Mineworkers has rejected offers from gold producers and may decide on a strike as soon as Aug. 31.
“Strikes are not the end of the world,” Gordhan said yesterday. “Every part of the world has strikes. I do not think we should overplay it.”