Weakening Rand would be'very short-sighted' - IMF

| Thursday March 11, 2010 00:00

Local union federation Cosatu, an ally of the ruling ANC, has called on the central bank to widen its inflation targeting mandate and wants a much weaker rand to help boost local industries and create jobs.

Strauss-Kahn said any policy measures that led to a weakening of the rand would scare off the foreign investors and capital that are needed to fund the country's current account deficit.

The rand gained about 30 percent against the dollar in 2009 and is considered relatively strong at its current levels of around 7.40/$.

Late last year the government expressed concern about the currency's strength and in February Finance Minister Pravin Gordhan said he would like to see less volatility in the rand.

South Africa emerged from its first recession in 17 years in the third quarter of last year, but is still grappling with the loss of a million jobs last year that pushed official unemployment up to nearly one in four of the workforce.

Strauss-Kahn also said policymakers in Africa's biggest economy should introduce more competition into the economy - especially into a banking sector dominated by four major players. 'Creating more competition would certainly have a good impact on inflation,' he said during a lecture at Johannesburg's Wits University.

Strauss-Kahn is due to meet South African President Jacob Zuma later on Tuesday and is likely to press home this message. 'Efforts have to be made to create a more effective economy,' he said.