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Johannesburg - Finance Minister
Pravin Gordhan reiterated on Tuesday that South Africa's economic policies are to remain unchanged, despite criticism from the ruling alliance's left-leaning partners.
In answer to a parliamentary question on Monday – delayed from May as Ebrahim Patel had to be consulted as well – Gordhan has managed to remove any uncertainty in currency markets in one fell swoop.
Until now it was thought Gordhan's views on the rand, inflation targeting and interest rates differed radically different from those of Patel.
Patel effectively became Cosatu's appointee as economic development minister after the 2009 election as the trade federation's reward for supporting the ANC.
Gordhan said on Monday that the inflation targeting framework provides investors with confidence and the South African Reserve Bank with flexibility in times of financial crisis. The flexible exchange rate policy acts as a buffer against external shocks and reduces volatility of interest rates.
"SA economic policies are likely to remain unchanged despite calls by Cosatu to weaken the rand and cut interest rates in response to weak consumer balance sheets," said Nedbank Capital on Tuesday in reaction to the news.
And the Rand Merchant Bank currency desk feels Gordhan's statement doesn't give any hint that the authorities are being persuaded to pursue a weak rand policy.
- I-Net Bridge