Our coun­try’s mone­tary af­fairs

Finweek English Edition - - Letters - JHJ VAN RENS­BURG

WHY ARE YOU, Fin­week and our mon­e­trary au­thor­i­ties, con­cerned about in­ter­est rates? Why are you try­ing to keep in­ter­est rates ar­ti­fi­cially low? Do you know – do you re­mem­ber – there was a time when you kept in­ter- est rates ar­ti­fi­cially high? Have you forgotten the dis­grace and the great em­bar­rass­ment you brought on South Africa with those ar­ti­fi­cially high in­ter­est rates?

That was in 1985. It was an­nounced on the ra­dio and on TV on a Sun­day evening and im­me­di­ately af­ter that the banks re­ceived in­struc­tions from the SA Re­serve Bank: the debt stand­still. No­body was al­lowed to re­pay for­eign debt, ex­cept for new trans­ac­tions. SA’s good name suf­fered. The dis­grace was caused by ar­ti­fi­cially high in­ter­est rates while the mone­tary au­thor­i­ties or­dered the banks to en­cour­age their clients to bor­row over­seas at lower in­ter­est rates.

That was done for the sake of the bal­ance of pay­ments. It was a short-term ben­e­fit but wasn’t sus­tain­able. And it wasn’t sen­si­ble. You must have re­alised SA’s high in­fla­tion was weak­en­ing the ex­change rate and that those loans would have to be re­paid one day. You can’t say you didn’t un­der­stand that. Nor did you do any­thing for the peo­ple who, com­ply­ing with your in­struc­tions, had to pay their debt back dou­ble. You brought dis­grace and chaos to us with ar­ti­fi­cially high in­ter­est rates. It’s bet­ter for in­ter­est rates to be de­ter­mined by the mar­ket and the banks. A mea­sure of con­trol over banks is im­por­tant and fair, be­cause the State has a duty to all its cit­i­zens.

Please re­alise that the sale of ex­port prod­ucts is good busi­ness; but if you live on the sell­ing of in­her­ited goods it’s not. A young farmer who in­her­ited his fa­ther’s farm is now sell­ing off por­tions of it. A large part of Stan­dard Bank al­ready be­longs to for­eign­ers. The Wa­ter­front in Cape Town has been sold to for­eign­ers. Absa was the loss of a crown jewel. De­spite warn­ings, it was done.

Do those who gov­ern us – that is, the mone­tary au­thor­i­ties and the press – think with for­eign brains? A large por­tion of the JSE al­ready be­longs to for­eign­ers. And then Gov­ern­ment and the press cel­e­brate the in­flow of for­eign money as a re­sult of the sale of things that shouldn’t be sold.

And an­other dan­ger: for­eign fi­nanc­ing must be re­garded as flight cap­i­tal. It can be with­drawn – with cat­a­strophic re­sults for the BOP. The dis­grace could be worse than the debt stand­still that started in 1985. SA’s cheques were re­turned un­paid – and it could hap­pen again.

Gouritsmond * Let­ter short­ened

– Ed­i­tor

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