The South African Reserve Bank (SARB) governor and deputy governor have said they are not concerned with the rand’s performance against the dollar. Rather, they focus on protecting the currency’s value within the country.
This comes in light of the rand hitting its lowest level since 2020, reaching R18.81/$ on Wednesday, 10 May. The rand has been stranded above R18 to the dollar since the start of April 2023.
SARB governor Lesetja Kganyago told The Money Show that the currency is very volatile.
“On a given day, it is the best-performing currency. On the other day, it is the worst-performing currency.”
He said the SARB has the primary responsibility to protect the currency’s value – “not what it can buy in New York or Hong Kong or London or Frankfurt – what it buys at home”.
SARB deputy governor Kuben Naidoo echoed this sentiment to CNBC Africa.
“We don’t attempt to control the currency, we don’t attempt to peg the currency, and we don’t try to achieve a particular level of the currency,” he said. Rather, the SARB worries about the currency “in a broader sense”.
While he acknowledged that the rand is trading slightly below fair value to the dollar, he does not think fair value is a long way off from R18 to the dollar.
He added that the best way the SARB can protect the currency’s value is by keeping inflation low. South Africa’s inflation increased markedly in 2022, averaging 6.9%.
The Consumer Price Index (CPI) peaked at a 13-year high of 7.8% in June 2022 and moderated to 7.1% in March 2023. Food inflation currently stands at a 14-year high of 14.0%.
However, Kganyago said the Reserve Bank only has a few instruments at its disposal to control inflation, and these instruments include one that borrowers do not like – the interest rate.
In March of this year, the SARB implemented its ninth consecutive interest rate hike in this hiking cycle to bring inflation within its target range.
The repo rate currently stands at a decade-long high of 7.75%.