Rand weak, not strong
VIC DE KLERK’S suggestion – that the rand is strong – is in my view not based on real facts (“Rand reering towards becoming dangerously overvalued”; 15 April). The value of a currency rises or falls relative to another and not in relation to invented mathematical standards, foreign to basic economics. The rand is currently very, very weak. In 1979/1980 the US dollar/rand ratio was 1+ to 1. It’s now 1 to 7+. Early on, the pound sterling/rand ratio was 1 to 2. It’s now 1 to 11+.
De Klerk complains South Africa’s industries can no longer compete with imported goods. If the said industries have a desire to be competitive they must be innovative and increase productivity. They should desist from trying to pressurise SA Reserve Bank Governor Marcus to intervene in the currency market. Such a step would have negative effects on the whole economy.
Furthermore, Adam Smith’s “Invisible hand” is supposed to displace interventionist economic policies in a free market system.