Govt may 'freeze' rand - report

Johannesburg - Ebrahim Patel, Minister of Economic Development, is preparing to propose "radical" economic policy adjustments, including fixing the currency, according to Afrikaans newspaper Beeld.

According to unnamed sources, Patel is reportedly considering a controversial proposal to freeze South Africa's currency at a predetermined exchange rate, so that the economy can benefit from the stability of the rand.

Beeld reports that Patel is apparently working closely with Dr Blade Nzimande, Minister of Higher Education and Training, a political ally of his, in formulating a series of interventions to adjust the economic growth rate in favour of accelerated job creation.

Patel has received a boost from the resignation on Monday of Joel Netshitenzhe, head of policy in the presidency, who was pivotal in policy formation in the administration of former President Thabo Mbeki.

President Jacob Zuma also made it clear in a speech last week that Patel was responsible for the planning of micro- and macroeconomic development.

In addition, he could benefit from the delineation of Cabinet committees earlier this week in which Patel formed part of the economic subcommittee while Trevor Manuel, Minister of planning, was not a member.

"It is necessary to ensure in future that the conservatives do not dominate the debate," a member of the ruling party's economic planning circle reportedly told Beeld.

Any plans to freeze the rand was denounced by Dawie Roodt, chief economist of the Efficient Group, and Professor Ben Smit, director of the Bureau for Economic Research at the University of Stellenbosch.

According to Roodt, this indicates "a definite shift to the left". "It will mean government frees itself from inflation targeting, which Cosatu has long been advocating. We simply can't do it here. Yes, our exports will be more competitive, but inflationary pressures will get us in the end."

Smit told Beeld such a decision will be out of kilter with the recommendations of the Harvard Study Group, which classified the rand as a currency that should have a floating exchange rate. According to him the rand was last fixed in 1974 to 1975.

Patel's proposed interventions will reportedly be based on the ANC's Polokwane resolutions and will target job-creation rather than measurable and sustained economic growth.

The plans involve greater government interference in the mineral and energy sectors.

- Fin24.com