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Johannesburg - Proposals by the ANC for the introduction of a tax on capital inflows to curb rand strength will be subject to a long process of consultation, party treasurer-general Mathews Phosa said on Wednesday.
The rand retreated from 3.5 month lows on Tuesday as a newspaper report on a proposed tax fuelled talk of possible central bank intervention in the market. The currency firmed briefly after Phosa's comments to trade at 7.2550 to the dollar.
"We are discussing the document in the branches and we are allowing members of society in South Africa to make comments. It's a long process of consultation. The ANC has never rushed into policy, it always discusses properly," Phosa told Reuters.
"It's a long process of consultation. The ANC has never rushed into policy, it always discusses properly. And it has always been inclusive in terms of consulting, not only its members, but also non-members."
The ANC's powerful labour union allies have long called for the Reserve Bank to weaken the rand to about 10 against the dollar and support the manufacturing sector, struggling to recover from last year's recession.
Both President Jacob Zuma's government and the Reserve Bank have said the rand's relative strength undermines export competitiveness and ultimately economic growth, but have insisted the exchange rate should be determined by the market.
The rand, which hit 7.2490 against the dollar at the start of the week, its strongest level since April 13 firmed to 7.25 after Phosa's comments from 7.2690 beforehand.
Phosa said the document would be up for discussion at the ANC's National General Council meeting in September, but that this would only be in preparation for a national consultative conference next year, which would in turn make recommendations for the party's elective conference in 2012.
"There's debate already taking place, which is fine, but it's too early to talk about feedback (on the proposals)," Phosa said.
Market analysis service FCAST said in a note that Phosa's comments confirmed market expectations that "the tax idea is more a reflection of ANC's concern with the strong rand than a real measure anything close to implementation".
"Though Phosa's calming words help to clear the situation and hence takes some pressure off the rand, the fact remains that a strong rand seems neither desired by fiscal nor monetary policy makers. Noise about the rand is likely to remain."
- Reuters
