Businessweek: Kindly clarify the point you made at the conference on the need for Africa to move away from reliance on the US dollar as a base currency?
Visser: Currencies are always quoted as a cross rate, i.e. the "price" of one currency relative to another. But this price is as much a reflection of the numerator (e.g. Botswana Pula) as it is of the denominator (e.g. the US dollar) - if there is a change in the BWP/USD rate, it is not always clear if that change reflects change in Botswana (Pula) or change in the US dollar. This is most evident on days when the local market is closed for business, yet the currency cross rate still changes, due to change in the US$. Thus consider a situation that affects the fundamentals of the US dollar (e.g. the US$ falls by 10 percent), but not the fundamentals of Africa, or a region such as SADC. In this case both the BWP/USD rate and the ZAR/USD rate will reflect the same changes in the USD (BWP/USD and ZAR/USD both gain 10 percent), but there will be no change in the BWP/ZAR rate! The use of the US dollar (or any other "foreign currency for that matter) as the base currency in Africa introduces the effect of fundamental factors that has nothing to do with Africa, into the equation. This adds unnecessarily to costs - both direct (spot rates) and indirect (hedging).
