Some choice quotes from the article and comments from myself:
Firstly, I prefer to call his ministry “the department of mercantilism and protectionism” because it always seems to be agitating for the interests of exporters and unions. They recently attempted to prevent a merger between Wal-Mart and a local big-box retailer at the behest of the unions and other “vested interests”.
Secondly, how much pretentious knowledge and fallacious economic reasoning can this creep throw out? He asserts the rand is “overvalued”? Does he even know how a market works? How could he know what the “right” value is? How could he claim the rand is not a desirable currency when, relative to the USD, it clearly is currently! Is he proposing we indulge in that great oxymoron of “competitive devaluation”?
Well, gee, if it’s concerning two special interest groups then it must be a matter of national concern!
And herein lies the inconsistency of the government. Every time the Reserve Bank holds a press conference there is always some shill reporter bleating about how “exporters are suffering” and “can’t the Reserve Bank intervene?” Fortunately, the SARB seems to be under the control of influences far above the petty political classes and quashes any such speculation quite comprehensively. This fact alone is the only thing that gives me faith in this country’s monetary affairs compared to other nations.
But then again:
Duplicity is so quaint. The government needs the unions, so here’s their underhanded little stealth subsidy. I wonder how the Reserve Bank will return the favour to government in future?
What conclusions do I draw from this? Internal government monetary policy is schizophrenic, but has insanity held at bay by the fact that the Reserve Bank is far less political than other central banks. Will the status quo hold? Only time will tell. However, I fear any bout of major inflation could let slip the populist dogs of mercantilism.
The present “race to the bottom” between the US dollar and the euro is bound to force more and more countries into such “compromises”, especially when we consider the yuan/renmimbi it’s pegged to the dollar. Big net exporters with a less insane monetary policy (Australia, New Zealand, Canada, Switzerland etc) have all seen their currencies appreciate massively against the euro and the US dollar in the past eighteen months. This of course has led to cries for “competitve devaluation”.
South Africa’s present situation reminds a bit of Germany in the second half of the '70s, when the Bundesbank resisted all cries for “competitive devaluation” from the big exporters, worried sick about how strong the mark was becoming relative to the US dollar, the French franc and the British pound. Sure, Germany in that period had inflation but compared to what was going on in the US or Britain it was small fries. The Bundesbank was more or less able to hold its ground (mostly because the widespread popular support it enjoyed) until the EMU came about. Luckily for South Africa I don’t see anything similar happening to them in the near future.
I’m concerned that they’ll cave in and “competitively devalue” to some extent. If a significant price inflation hits there’ll more support for wage, price and capital controls. The official price inflation rate (which no doubt under-states matters) hovers between 3% and 6% annually. The price of gasoline (which is set by the government) has risen to between $5 and $6 per gallon. Of course, nobody mentions that a strong Rand helps to off-set the higher price of oil.
There are some real raving mercantilisits in this country; people who would like to put 300% tarriffs on imported Chinese goods to “protect” domestic industries and workers. It’s concerning, to say the least. One whiff of any such mercantilist measures and there’s be a capital flight so fast it’ll make the 80’s and 90’s look like a cakewalk.