Rand's slump sounds alarm bells

Cape Town- South Africa (PANA) -- The decline of the rand currency to new record lows against the dollar and pound over the last week has not escaped the attention of the South African media which has been almost unanimous in sounding alarm bells.
The rand came under renewed attack amid market jitters over how the United States would respond to last month's terrorist attacks.
For the first time, it dropped to below nine to the dollar, marking a 20 percent decline against that currency since the beginning of the year.
Economists have argued that the rand has been more vulnerable than it should have been because of the impact of the Zimbabwe crisis on regional stability and South Africa's handling of the crisis over the past 18 months.
But of greater concern is the fact that since President Thabo Mbeki's government took office in June 1999, it has lost 50 percent of its value relative to the US dollar.
The Sunday Times said it is time South Africans accepted the sad reality that the country has a soft currency that will continue to decline against the stronger currencies of the world's major economies.
"South Africa's fundamentals may be sound, but it must face the fact that, at least economically speaking, it is viewed as an emerging market at the tip of Africa, uncomfortable close to Zimbabwe.
Its crime and AIDS statistics are a serious disincentive for investment, as are, arguable, its labour and tax laws," the newspaper said in an editorial.
Business Day newspaper pointed out that South Africa has not been alone among emerging markets as the Brazilian real has weakened about 40 percent this year.
It noted that South Africa's current account has remained in surplus and the country's trade performance has been so impressive that some economists are even beginning to talk of an export miracle.
It said South Africa's trade performance is impressive, its inflation rate has hit the targeted 6 percent level, and its budget deficit is below 3 percent of gross domestic product.
It criticised the government's failure to bring its privatisation process off the ground.
"Privatisation will draw in big capital inflows of a permanent nature, enabling the Bank to buy forex and eliminate the forward book.
In a stroke, the rand would no longer be a one- way bet.
"Economists were optimistic about privatisation, which explains their bullish rand forecasts at the beginning of the year.
But government's sale to foreign investors of its stake in listed cellphone company M-Cell has yet to materialise.
"Telkom's listing may just make it into this fiscal year.
Two fundamental weaknesses are thus weighing on the rand the forward book, and delays in getting privatisation off the ground.
No wonder the rand is going one way," it said in an editorial.
However, Rapport newspaper said the decline of the rand did not justify all the despair and was not a death sentence to the South African economy.
It pointed out that Russia's rouble had been devalued by 90 percent in 1998 and claimed that move had helped turn its economy around.

04 Outubro 2001 17:08:00

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