|January 24, 2002
Rand Commission Gets Busy
Advocate John Myburgh's commission to investigate the causes and trace
down the culprits for the sharp decline in the Rand last year will kick off on
January 25, afternoon. The commission had been appointed by President Thabo
Mbeki mid-January to investigate the rapid decline of the South African
currency upon request of the SA Chamber of Business which claimed to have
sufficient evidence to bring to book the people responsible for the rand's
A source close to the commission said there has been significant
progress in terms of getting the commission ready to start its investigation
and hearings. It was said the commission has approached close to twenty local
and international experts to assist the three commissioners.
But many experts already said, that they dont expect any real
results of the investigating: They will find that one or two exporters
delayed repatriating their dollars and punishing them for that will be against
the spirit of relaxing exchange controls," said Dawie Roodt of PLJ Financial
services. Media reports however claimed that two foreign banks - JP Morgan and
Deutsche Bank - were at the heart of market rumours.
The financial grapevine alleged traders had used information of a Rand 4
billion outward capital investment - organised by the banks - to
short the currency. Shorting is the name given to a
trading practice of selling the currency and buying in later at cheaper levels.
The banks denied direct involvement and welcomed the inquiry as an opportunity
to deal with the rumours.
Late last year at the time of the transaction, the Rand plunged to its
lowest levels against the U.S. dollar and the British Pound. Ahead of
Christmas, the Rand was trading at R13.86 to the U.S. dollar - its worst ever.
This spiked fears of food price rises after the first quarter of the new year
as a rising import bill for fuel and other commodities began to feed into the
value chain, hiking inflation.
With the inquiry, the tide may turn against speculators and analysts who
have looked everywhere but at their own actions to rationalise what seemed an
inexplicable fall in the currency. They have compiled an A to Z smorgasbord of
reasons - or the Argentina to Zimbabwe factors as they are dubbed in South
Africa. This involved blaming everything from the collapse of the Argentinian
economy to the political tensions in neighbouring Zimbabwe for the currency
Economist Asgar Adelzadeh has welcomed the inquiry, but warned it should
not mask real problems - other than the rogue currency speculators that
was leading to a long-term decline. Growth rates in South Africa were lower
than the median expected in Asian and Latin American countries of similar sizes
and economies, making it difficult to attract foreign investment. Domestic
investment was declining rapidly, said Adelzadeh.
While the private sector had invested R 840 million in financial and
foreign assets last year, there was only R127 million invested in the real
economy stock that created jobs and spurred growth. In addition, domestic
businesses were responsible for huge capital outflows as they set up shop in
industrialised countries. In the first three-quarters of 2001, R 19.3 billion
in profits and dividends were repatriated by local businesses, up from R 11.5
billion in 2000 and only R2.2 billion in 1998.