PROMOTING DIALOGUE ON TRADE REFORM IN SOUTH AFRICA

In a 2010 statement, Lesetja Kganyago, Director General of the National Treasury, discusses the role of the rand's exchange rate in South Africa's economy. He argues that while a depreciated currency can support exports, it is not a 'silver bullet' and must be accompanied by low inflation and productivity growth to be effective. Kganyago defends the managed float regime as a necessary shock absorber and warns against a fixed exchange rate, which would sacrifice monetary sovereignty. He emphasizes that long-term competitiveness requires microeconomic reforms, including infrastructure development and education, to address structural rigidities.

• The nominal value of the rand is more competitive currently than it was on average during the 1990s, suggesting that the spot exchange rate is not the primary cause of poor export performance.
• Domestic inflation is as critical as the nominal exchange rate in determining the real exchange rate; allowing inflation to rise would make traded goods less competitive and lead to permanently high interest rates.
• A depreciated exchange rate only leads to increased production of traded goods and higher GDP if it is paired with low domestic inflation or rapid increases in labour productivity.
• The National Treasury and Reserve Bank shifted policy to support a competitive exchange rate by closing the forward book in 2004 and strengthening foreign currency reserve purchases.
• A fixed exchange rate regime is rejected as an unsuitable solution for South Africa because it would require the loss of monetary sovereignty and remove the currency's ability to act as a shock absorber for terms-of-trade changes.
• To achieve sustainable competitiveness, South Africa requires microeconomic reforms to remove product and factor market rigidities, alongside investments in education and infrastructure.
• Exchange rate volatility primarily affects small and medium-sized exporters; the document suggests targeted intervention to help these firms manage hedging costs rather than a broad macroeconomic approach.

APA

Kganyago, L. (2010). PROMOTING DIALOGUE ON TRADE REFORM IN SOUTH AFRICA. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2010/03/dttp_workshop_treasury_director_general_speech_20100323.pdf

Chicago

Kganyago, Lesetja. PROMOTING DIALOGUE ON TRADE REFORM IN SOUTH AFRICA. South African Institute of International Affairs, 2010. https://saiia.org.za/wp-content/uploads/2010/03/dttp_workshop_treasury_director_general_speech_20100323.pdf.

Wikipedia

{{cite press release |last1=Kganyago |first1=Lesetja |title=PROMOTING DIALOGUE ON TRADE REFORM IN SOUTH AFRICA |publisher=South African Institute of International Affairs |date=23 March 2010 |url=https://saiia.org.za/wp-content/uploads/2010/03/dttp_workshop_treasury_director_general_speech_20100323.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@misc{kganyago2010promoting, author = {Kganyago, Lesetja}, title = {{PROMOTING DIALOGUE ON TRADE REFORM IN SOUTH AFRICA}}, publisher = {South African Institute of International Affairs}, year = {2010}, month = mar, url = {https://saiia.org.za/wp-content/uploads/2010/03/dttp_workshop_treasury_director_general_speech_20100323.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }