Gordhan warns of 'trade war'

Johannnesburg - Finance Minister Pravin Gordhan warned on Tuesday that the so-called currency wars could lead to what he referred to as 'trade wars,' if they are allowed to continue.

Gordhan was speaking at the National Consumer Goods Council of South Africa's annual conference.

"The danger that we face as the world is that in an effort to keep our own countries going, where each country tries to become competitive on the basis of the so-called competitive currencies, that will result in a currency war. But this could result in a trade war where countries will put up barriers," Gordhan said.

Strong currencies in emerging markets are currently the subject of debate in the global arena. These markets' currencies are strengthening on the back of strong capital flows as investors search for better yields.

"We like to refer to the strength of the rand; what we have right now is the serious danger of competitive devaluation," he said.

Gordhan suggested that the next national aspiration after the 2010 Fifa World Cup should be the development of "a thriving economy", which he said would narrow the gap between rich and poor and create employment.

Finance ministers and central bank governors who will meet in the next few days for the G20 meeting will have a lot on their agenda, according to Gordhan. South Africa will attend the meeting.

"They'll have to work out whether they have the willingness to ensure that we put national interest second to global interest, that countries will need to give up something in order for everyone to benefit. We need a coordinated effort," he said.

"If we understand currency dynamics, the singleness of purpose is how we develop a common strategy to build our economies," he added.

The minister said challenges for the retail sector include the effect of price-fixing and other collusion practices on the industry, other sectors and consumers.

"Fixing food prices is a crime to the poor. Competition authorities have done a lot in recent years to unearth uncompetitive behaviour," he noted.

Job creation

The country's retail sector must play a role in promoting economic growth and job creation, Gordhan said.

"The World Cup showed the resilience of South Africa to set up aspirational targets and deliver on those aspirational targets," he said.

Gordhan said the next "aspirational target" for South Africans should be to push economic growth to 7% "for a sustained period of time".

This would give "hope, jobs and alleviate poverty".

"Unless we do that, we won't have a South Africa all of us can be proud of and we won't have a South Africa at peace with itself."

Gordhan said the council was important to the country as it fed the nation and supplied day-to-day necessities.

"Your businesses are important for millions in terms of the prices they pay and how they cope with rising food prices."