South Africa’s automotive parts manufacturers added their voices on Tuesday to a growing chorus of calls for official intervention to stem the rampant rand, as it rocketed to new 3-1/2 year peaks against the dollar, Reuters reported.
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This took gains this year in the volatile unit, which threatens to curb growth in South Africa’s export-driven economy, to more than 26%, Reuters noted, adding that, on a more important trade-weighted basis, it has appreciated by 18.5%.
The executive director of the National Association of Automotive Components and Allied Manufacturers (Naacam), Clive Williams, told Reuters he was drafting a letter to the Reserve Bank which he hoped to send by the end of the week.
“This is very serious. For the last seven years, exports grew by 40%. Over the past (three) quarters growth is down to 5%,” he reportedly said, adding: “Manufacturers are losing export contracts and at the same time they have to compete with cheap imports at home.”
Car parts makers are linked to vehicle production, which is South Africa’s biggest manufacturing industry, Reuters noted.
The news agency said the official mandate of South Africa’s independent central bank is to ensure price stability through achieving the government’s 3-6% inflation target – not to manage the exchange rate of the volatile rand.
But this has not yet filtered through to the general public, and various industry groups have recently urged the Reserve Bank to buy dollars in a bid to stem the rally in the rand, which is so far the best performing currency in 2003, Reuters said.
There has so far been no comment from the government on the unit’s gains this year, which has started to erode the export earnings of top companies — prompting howls of anguish — and also hit official tax revenues, the report added.
“The Reserve Bank is the one driving the value of the rand through their high interest rate policy because they want to bring inflation down,” Williams told Reuters.
Williams reportedly said Naacam would like to see the rand between 9.30-9.60 against the euro compared with 8.05 now, and about nine to the dollar.
“We had started to make significant inroads into the United States. With such a weak dollar, it’s difficult to compete with American manufacturers,” he told Reuters.
The news agency said Naacam’s latest data show the value of component exports jumped by 47.6% to 18.6 billion rand ($US2.73 billion) in 2001 from 12.6 billion rand in 2000, with a sharp plunge in the rand that year contributing to the jump.
Exports were forecast to rise to 24.5 billion rand in 2002, with figures due later this year, Reuters added.
Catalytic converters, which make up almost 50% of component exports, have attracted the world’s major producers of the exhaust system filter to South Africa, the report added.
Reuters noted that South Africa supplies about 30% of the EU’s catalytic converters while car makers such as Renault, Volkswagen, Ford and BMW have invested in the local components industry.
