Bank chief urges freedom for rand

Hugh Pope on the case to relax exchange controls

CAPE TOWN - Conditions are ripe to start dismantling South Africa's decades of strict exchange controls, and the timing of the decision is now up to President Nelson Mandela's government of national unity, Dr Chris Stals, governor of the Reserve Bank, said yesterday.

Since last year, foreign reserves had strengthened to about 12bn rand (£2.1bn) and South African interest rates were closer in line with the rest of the world, Dr Stals said. There had also been a fall in foreign holdings of the key exchange control instrument, the financial rand, which was within 10 per cent of the currency's market value.

President Mandela has said the financial rand will be dropped soon. Dr Stals declined to comment on timing, saying only that "there has been so much speculation in the markets that one day they will be right".

The Reserve Bank followed international interest rates up yesterday by lifting its discount rate 1 per cent to 14 per cent. Dr Stals said the move was a vital signal of tight monetary policy needed to control a 16 per cent expansion in the money supply last year, well above last year's 9.9 per cent rate of inflation. Money supply had been boosted mainly by a boom in credit to consumers and the private sector.

Rather than triggering an outflow of funds, Dr Stals thought it more likely that freeing exchange controls would initially bring an inflow of funds from banks and institutions keen to invest in South Africa and profit from interest rates well above the rate of inflation. But the bank still needed more reserves in case that capital suddenly took fright.

The Reserve Bank was already buying dollars in a fight to prevent the rand from appreciating too fast against world currencies, Dr Stals said. The financial rand was trading at about 3.83 rand to the dollar yesterday, compared with a commercial rand rate of about 3.53.

Dr Stals said the biggest outflow was likely to come from South African insurance and mutual funds. The biggest four institutions alone held 400bn rand in investments but had not one cent invested abroad. Exchange controls for private residents who wished to transfer money abroad would probably be the last to go, he added.

The financial rand was introduced to protect the South African economy from sanctions and capital outflows during the years the world isolated the country because of its racist apartheid policies.

News
Pro-Russia rebels guard a train containing the bodies of victims of the Malaysia Airlines flight MH 17 crash in Torez, Ukraine
i100
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
Property
Sign here, please: Magna Carta Island
propertyYours for a cool £4m
PROMOTED VIDEO
News
people
Arts and Entertainment
Struggling actors who scrape a living working in repertory theatres should get paid a 'living wage', Sir Ian McKellen has claimed
theatre
News
Skye McCole Bartusiak's mother said she didn't use drink or drugs
peopleActress was known for role in Mel Gibson film The Patriot
News
i100
Arts and Entertainment
Damon Albarn is starting work on a new West End musical
artsStar's 'leftfield experimental opera' is turning mainstream
Life and Style
Paul and his father
artsPaul Carter wants to play his own father in the film of his memoirs
Sport
Ben Stokes trudges off after his latest batting failure for England as Ishant Sharma celebrates one of his seven wickets
cricket
Arts and Entertainment
Members of the public are invited to submit their 'sexcapades' to Russell T Davies' new series Tofu
tv
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Sky's Colin Brazier rummages through an MH17 victim's belongings live on air
i100
Arts and Entertainment
Keira Knightley and Benedict Cumberbatch star in the Alan Turing biopic The Imitation Game
arts + ents'The Imitation Game' stars Benedict Cumberbatch and Keira Knightley
Extras
indybest
News
i100... and no one notices
Arts and Entertainment
Friends reunited: Julian Ovenden, Richard Cant and Matt Bardock in rehearsals for the Donmar revival of 'My Night
with Reg'
theatrePoignancy of Kevin Elyot's play being revived just after his death
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Business Analyst (Systems/ Incident Analyst)

£40000 - £50000 Per Annum: Clearwater People Solutions Ltd: Business Analyst r...

BA/PM - Client Data

£500 - £550 per day: Orgtel: BA/PM - Client Data London (Greater)

Day In a Page

Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary
Legoland Windsor's master model-makers reveal the tricks of their trade (including how to stop the kids wrecking your Eiffel Tower)

Meet the people who play with Lego for a living

They are the master builders: Lego's crack team of model-makers, who have just glued down the last of 650,000 bricks as they recreate Paris in Windsor. Susie Mesure goes behind the scenes
The 20 best days out for the summer holidays: From Spitfires to summer ferry sailings

20 best days out for the summer holidays

From summer ferry sailings in Tyne and Wear and adventure days at Bear Grylls Survival Academy to Spitfires at the Imperial War Museum Duxford and bog-snorkelling at the World Alternative Games...
Open-air theatres: If all the world is a stage, then everyone gets in on the act

All the wood’s a stage

Open-air productions are the cue for better box-office receipts, new audiences, more interesting artistic challenges – and a picnic
Rand Paul is a Republican with an eye on the world

Rupert Cornwell: A Republican with an eye on the world

Rand Paul is laying out his presidential stall by taking on his party's disastrous record on foreign policy
Self-preservation society: Pickles are moving from the side of your plate to become the star dish

Self-preservation society

Pickles are moving from the side of your plate to become the star dish
Generation gap opens a career sinkhole

Britons live ever longer, but still society persists in glorifying youth

We are living longer but considered 'past it' younger, the reshuffle suggests. There may be trouble ahead, says DJ Taylor