The rand’s weakness cannot solely be blamed on the US trade war, says the Organisation Undoing Tax Abuse (OUTA).
OUTA on Friday submitted its practical recommendations to the economic cluster ministers to help ease the burden on South African consumers. This was in response to President Cyril Ramaphosa’s mandate to the ministers last week to find measures to cushion the effects of the fuel price hike and the VAT increase.
"The weakness of the rand cannot be solely blamed on the US 'trade war'. We were in trouble long before that. We need to root out corruption and build investor confidence to strengthen the rand," the organisation said in its report.
OUTA wants government to "critically analyse" and address excessive increases in taxes and levies over the last 10 years on the fuel price and other services.
"Many of the price adjustments have been made to cover shortfalls due to mismanagement and corrupt practices," OUTA said.
OUTA blamed the effects of state capture, corruption, maladministration and the general mismanagement of public funds for increasing the daily cost of living for citizens.
"South Africans have paid the price of corruption for far too long. It is imperative that the president deal with the root cause of our weakened rand while implementing short term solutions to help South Africans cope with over-inflated food and fuel costs," said Ben Theron, OUTA’s Chief Operating Officer.
Exchange rate
Referring to the 2008 exchange rate, under R7/$, OUTA pointed out that the rand reached a low of R16/$ in February 2016.
"The role of state capture cannot be ignored when it comes to the value of the South African currency.
"During the last decade, rating agencies have downgraded South Africa to junk status due to the blatant corruption and irrational decision-making that was clear with the frequent Cabinet reshuffles."
In its submission, OUTA said that the downgrades, also a result of the looting at state-owned enterprises, had a significant impact on rand strength.
In recent weeks, the rand and other emerging market currencies were negatively affected by developments in a trade spat between the US and China.
The currency opened at R13.30/$ on Friday morning and strengthened slightly to R13.22 by mid-morning. It was trading slightly weaker (0.20%) at R13.33 by 14:00.
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