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In 2011 the rand traded in range between R6.58 per US dollar and R8.60 per US dollar.

The result of this volatility is a sharp deterioration in the South African Reserve Bank's Gold and Foreign Exchange Reserve Account from R18.4 billion at the end of 2010 to a massive R78.3 billion at the end of 2011.

SARB Governor, Gill Marcus, has preferred to say that reserves are only accumulated when feasible, rather than that specific rand levels are targeted, though she has recently said the strong rand levels must be used to front-load on infrastructure spending - by buying goods now as it is cheaper.

The central bank, of course, has been able to use the strong rand to purchase dollars, which provides it with a buffer down the line to buy goods in dollars when the rand weakens.

Marcus stressed that the outflows from emerging markets during August and September last year were not in response to a deterioration in emerging market economic fundamentals, but rather due to liquidity needs by advanced economies banks. This was in part due to US money market funds withdrawing US dollar funding from European banks.  

Go to Budget 2012 Special Report