Magazine article New African

Rand Fiddle, Fiddle, Fiddle? the Commission Set Up to Probe the Fall of the Rand Has Presented Its Report-In Fact Two Reports. the Banks Have Welcome One but the Doubts Still Linger. (Special Report: South Africa)

Magazine article New African

Rand Fiddle, Fiddle, Fiddle? the Commission Set Up to Probe the Fall of the Rand Has Presented Its Report-In Fact Two Reports. the Banks Have Welcome One but the Doubts Still Linger. (Special Report: South Africa)

Article excerpt

In a modern economy, currency is everything. It has a huge psychological component, and often the general population has taken the strength of the currency as an indicator of the health of a country. This has considerable effect on mood, confidence, and inflation.

The rand has been no exception. In 1994, it traded in the region of R3.50 to one US dollar. Since then it has seen a gradual erosion in its power vis-a-vis other major currencies, reaching R7 to the dollar as recently as the beginning of 2000.

With a reputable team of experts behind the economy, namely finance minister Trevor Manuel and his director general Gilbert Marcus, South Africa has had one of the most solid and conservative economies in the emerging markets when it comes to fundamentals. It has largely remained unaffected by economic disasters that have plagued other countries like the currency crises in Asia, Latin America and Turkey.

As a result, it was surprising when the rand began a low steady decline from the beginning of 2001. Starting at R7.9 to the dollar, it saw a gradual erosion in value. It hit its current level of R10 to the dollar in the middle of last November before embarking on a steep fall to R13.85 to the dollar at the end of December. It was code red.

The R14.7m Myburgh Commission, set up to probe the rand's fall, has presented its findings. Two commissioners, Advocate John Myburgh and Mandla Gantso, have concurred but a third commissioner, Christine Qunta, has disagreed and compiled a "minority report".

Before the reports could be pronounced on by President Thabo Mbeki, they had leaked to the press, with spin doctors saying that the Commission had been a waste of money. The government was livid about the leak because there had been an attempt to obscure the "minority report".

The "majority report" simply rehashed the testimony and conclusion of witnesses, most of whom came to the Commission to protest their innocence.

In the final stages of the Commission's sitting, there was a closed door session with the chief culprit Deutsche Bank, in which an agreement was reached whereby Deutsche would do a deal worth R800m to reverse its earlier transactions in 2001 that was said to have depleted the country's foreign exchange reserves.

The whistle blower, Kevin Wakeford, chairman of the South African Chamber of Commerce, fingered dubious hedging, funding and related transactions surrounding share placements on behalf of the South African companies, Sasol, Nampak, and Mcell. Wakeford's allegations had a ring of truth.

The "majority report", though reluctant to upset Germany's biggest bank, found that the deal was not in contravention of the rules but it breached "the spirit of exchange controls". …

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