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Johannesburg - In the volatile global currency market, the rand has soared to a 33-month high against the dollar, complicating South Africa's efforts to tackle crippling levels of unemployment and poverty.
The rand has gained about one third on the US unit since the beginning of last year, climbing to R6.76 against the dollar on Thursday, its strongest level since January 2008.
That's causing headaches for President Jacob Zuma's government, which is under pressure from his leftist allies to follow through on pledges to bring down a 25% unemployment rate.
"It's very destructive for jobs, especially in manufacturing, mining and agriculture," said Azar Jammine, chief economist at consulting firm Econometrix.
The strong rand makes South Africa's exports more expensive in other countries, hurting manufacturing in particular, which has led the growth out of the country's first recession since apartheid.
"Over time we want to achieve a more competitive real exchange rate," Finance Minister Pravin Gordhan said in a written reply to a parliamentary question.
He is expected to present proposals for dealing with the strong rand in his mid-term budget speech next week, but it is not clear how much government can do.
With interest rates at near-zero levels in rich countries, investors flock to emerging markets for better yields on stocks and bonds.
This flood of foreign investment strengthens the currency, making it difficult for countries like South Africa to export goods at competitive prices.
Economists say South Africa is suffering the fallout from fears of a global "currency war," as nations seek to dampen their currencies to protect their exports.
"There is criticism of China for not allowing its currency to strengthen fast enough, and other emerging markets are instead bearing the burden of adjustment," said Razia Khan, an Africa expert at Standard Charter Bank.
"The strength of the rand is just a feature of these currency wars, with record inflows into South Africa."
It poses particularly pressing problems for South Africa, where about 4% of the population lives on less than two dollars a day.
That gives the country the world's biggest gap between rich and poor, and Zuma was elected last year on pledges to close the divide.
To do that, the finance ministry says South Africa needs sustained growth of around seven percent, but momentum this year is expected to hit just 3.25%.
Cosatu, the main labour federation which backed Zuma's rise to power, has led calls for government to curb the strengthening rand.
"We think the government must take drastic action," Cosatu spokesperson Patrick Craven said. "One step it could take would be to lower interest rates."
South Africa's benchmark interest rate is at 6%, and Cosatu believes a lower rate would indirectly weaken the currency.
Another proposal is to tax capital inflows, a tactic Brazil and Taiwan recently adopted.
But the ANC is wary of such tariffs because it needs foreign capital to finance the country's deficit.
So far, the ANC has rebuffed calls for government to intervene and weaken the rand, which Jammine believes could be the right move.
"Really, there's not much that we can do," he said.
"If the dollar was to suddenly appreciate then South Africa would suddenly become terribly uncompetitive ... and that's one of the reasons why, in a sense, South Africa is at the mercy of international events."
