Trade, Industrial Policy and Exchange Rates in South Africa

This research paper summarizes a Critical Thinking Forum co-hosted by the South African Institute of International Affairs (SAIIA) and the Mail & Guardian in March 2010. The forum examined the interlinkages between South Africa's exchange rate, trade, and industrial policies, specifically debating whether currency intervention could boost export competitiveness in the wake of the 2008–10 global financial crisis.

• Forum participants reached a consensus that manipulating the exchange rate to increase export competitiveness is not a 'silver bullet'. Instead, long-term international competitiveness, job creation, and exports depend on microeconomic reforms that address structural bottlenecks in key network services and underlying lack of competitiveness.
• Intervening to undervalue the exchange rate is viewed as unsustainable and potentially harmful. Such actions could create further distortions, undermine long-term competitiveness, and increase inflation, which would ultimately penalize consumers and exporters.
• The South African Reserve Bank's ability to intervene in the foreign exchange market is limited by the cost of such exercises and the relatively low level of reserves. For instance, reserves of approximately $40 billion are considered low compared to daily trade volumes in the rand market, which often exceed $10 billion.
• There is a policy tension between the Department of Trade and Industry (DTI), which focuses on the National Industrial Policy Framework (NIPF) to encourage value-added industrial production, and the Department of National Treasury, which supports trade liberalisation and microeconomic reform to boost exports.
• The role of the Congress of South African Trade Unions (COSATU) and the South African Communist Party (SACP) is highlighted in advocating for protectionist measures, such as raising import tariffs on clothing, to protect domestic employment and build local industrial capacity.
• Analysis suggests that South Africa is a price-taking rather than a price-setting economy because it is primarily resource-based. Consequently, currency depreciation may not significantly affect export prices, as the pass-through rate has historically closely matched depreciation.

APA

Draper, P. (2010). Trade, Industrial Policy and Exchange Rates in South Africa. South African Institute of International Affairs. https://saiia.org.za/wp-content/uploads/2010/08/Occasional-Paper-66.pdf

Chicago

Draper, Peter. Trade, Industrial Policy and Exchange Rates in South Africa. South African Institute of International Affairs, 2010. https://saiia.org.za/wp-content/uploads/2010/08/Occasional-Paper-66.pdf.

Wikipedia

{{cite report |last1=Draper |first1=Peter |title=Trade, Industrial Policy and Exchange Rates in South Africa |publisher=South African Institute of International Affairs |date=August 2010 |url=https://saiia.org.za/wp-content/uploads/2010/08/Occasional-Paper-66.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{draper2010trade, author = {Draper, Peter}, title = {{Trade, Industrial Policy and Exchange Rates in South Africa}}, institution = {South African Institute of International Affairs}, year = {2010}, month = aug, url = {https://saiia.org.za/wp-content/uploads/2010/08/Occasional-Paper-66.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }