EXCLUSIVE BY MICHAEL POWER
Why the rand must fall to save SA
Michael Power, a strategist at Investec Asset Management, but who writes here in his personal capacity, says a vital part of fixing the SA economy is an ultra-competitive exchange rate that will reduce our dollar-based wages and increase our prices
I was recently asked: “What is wrong with the SA economy? Why can’t it grow like other emerging markets?” The emphasis of the question was on the concept of “wrong”.
In answering this question bluntly, I will probably upset friends and colleagues. Labour unions will not like my argument. Most captains of industry will hate it. The establishment will call for my head. Government, especially treasury and the Reserve Bank, will reject my logic point-blank. And the economics profession, of which I am a part, will probably dismiss my analysis out of hand. Indeed, the only SA interest groups I will not offend are the tragically large pool of unemployed and the exporters.
Mel Brooks once said: “We want to get people laughing; we don’t want to offend anybody.” My approach here is the opposite. I want to get people thinking. I am paying homage to John Maynard Keynes’s dictum: “Words ought to be a little wild, for they are the assault of thought on the unthinking.” When referring to SA’s economic future, we commentators have to be especially careful not to let our personal circumstances cloud our professional judgment. Upton Sinclair noted: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.” My aim here is not to offend. Nor is it to put anyone’s back up. I am truly sorry if I do. Rather, my aim is to have a fresh conversation here in what I fear has become a sterile debate, to question what needs to be questioned: SA is in economic peril and we really do need to reopen every aspect of the debate about macroeconomic policy. Phrases like radical socio-economic transformation are all the rage in SA...