MONETARY POLICY
GAVIN KEETON: Steady rand depends on improved investment climate
South Africans have become so used to gyrations in the rand exchange rate that a sudden weakening like occurred last week passes with little attention. This indifference does not mean large changes in the rand’s value do not matter. Rather, it is a recognition that, often, the rand regains at least some of the value previously lost. People are also aware that there is little the government or the Reserve Bank can do to "rescue" the rand in the short term. The root causes of the rand’s volatility are our persistently large trade and services deficits with the rest of the world, and the instability of the foreign inflows that are needed to fund these shortfalls. SA attracts little in the form of foreign capital investments in physical or commercial development. Once made, such investments are not easily reversed, and so we would benefit long term from such capital inflows. Instead, SA attracts the type of inflows where foreigners acquire government bonds or shares on the JSE as part o...
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