ANC moots mining wealth fund to curb rand
Johannesburg - The ANC is considering starting a sovereign wealth fund from proceeds of a proposed new mining tax that could be used to intervene in the market to cap gains in the rand in times of a commodity boom.
Such a move would be a departure from current policy under which the Reserve Bank does not actively intervene in the market to target a level for the rand’s exchange rate.
A study on mining sector reforms submitted to the ANC, a copy of which was obtained by Reuters on Wednesday, proposed the introduction of a “resource rent tax (RRT) of 50%” on all mining.
“The RRT proceeds should ideally be kept in an offshore Sovereign Wealth Fund to ameliorate the strengthening of our currency during commodity booms,” it said.
Manufacturers blamed the currency for poor export performance when the rand gained about 30% against the dollar in the two years to end-2010.
The rand subsequently lost about 20% in 2011 but manufacturers have previously said they would like the rand trading at around R8.50/$, compared to R7.55/$ last on Wednesday.
The rand is a heavily traded currency that is given to wild swings in line with changing investors’ sentiment.
Gross foreign exchange reserves of $51.45bn at the end of January do not give the central bank enough firepower to have an impact in the foreign exchange market in which more than half of trades on the rand are offshore.
When will this Goverment stop introducing all these new taxes, paricularly as the proceeds will simply end up in Goverment funds and not be used for their intended purpose.
What a joke!
Just leave the rand alone. It is doing fine. We want a stable rand, not a weak one!
How would a weaker rand benefit the poor?
In an offshore account, beyond the AG scrutiny? Our money sent out of the country? Why would that be necessary? You can keep forex anywhere!