South Africa and the RandJukka Valimaa & Phil Walker

Why is the rising rand a problem?

• ANC support 60%• Tripartite Alliance– COSATU– SACP

• COSATU Secretary General– "We will support the ANC to win the local-government

elections next year, but we can't support people we definitely know are…unfit to be leaders. … If we can't get our way, why must we legitimise their campaign and give them a blank cheque?"

What could be done about it?

• 1. Lower interest rates• 2. Quantitative Easing

Interest Rate (Nov 2010: Record low, 5.5%)

Inflation (very low, 3.4%)

Exchange Rate (very strong, 1 USD = 6.89 ZAR)

Next step: Change capital account balance

• By Tobin tax? No.

• Eliminate apartheid-era restrictions on capital outflows

Questions?