THE strength of the rand will remain a talking point in 2011 whether it is strong or weak, an economist said yesterday.
Efficient Group economist Dawie Roodt said if the rand remained strong, inflation would remain low and so would the interest rates.
"This may seem good but it is bad for economic growth (because it has a negative impact on our exports)," he said.
Roodt said if the rand became weak in 2011 it would increase inflation and interest rates but would be "good for our exports".
He said another big issue to watch in 2011 was the European economies. He foresaw another debt crisis in Europe.
"What happens in Europe is important to South Africa because Europe is our biggest trading partner," Roodt said.
Looking back at 2010, the South African economy enjoyed a steady recovery from recession, but the main highlight of the year was the rate cuts that consumers enjoyed the entire year.
Reserve Bank governor Gill Marcus cut interest rates for the whole year to help the economy recover and ease the burden on debt- trapped consumers.
In each monetary policy committee announcement the repo rate was cut by 50 basis points, taking the interest rates to the lowest levels since 1974, and inflation fell comfortably within the targeted 3 to 6percent range.
"The economy is growing. This is the step to support the growth and ensure the recovery continues," Marcus said, qualifying the cut in September.
In the last interest rate cut in November the Reserve Bank cut the repo rate by 50 basis points to 5,5percent, which took the prime rate to 9percent.
The repo rate is the rate at which the Reserve Bank lends to commercial banks, while the prime rate is the rate at which the banks themselves lend to their prime clients.
Though Cosatu welcomed the cuts throughout the year, it still insisted that the Reserve Bank should not just focus on inflation targeting but also on job creation.
Economists attributed the interest rate cuts to a strong rand, which gave room for the monetary policy committee to cut interest rates while at the same time boosting the recovery of the economy from the global economic crisis.
While the strength of the rand had its positives, some quarters of the country called on the government to do something about its surge.
Finance Minister Pravin Gordhan said: "In addition to concerns about the global recovery ... there's an additional factor ... the rapid movement of huge capital flows around the world, which has an impact particularly on the currencies of developing countries like South Africa."
Gordhan said measures to handle capital inflows had to be found locally.
"We need to find tools in the domestic environment that ideally do not have a negative impact on other countries," he said.
At the time the rand had gained 28percent since the start of 2009 and was trading 0,57percent lower at R6,86 against the US dollar.
Both Gordhan and Marcus claimed that it was not the right time for South Africa to fix its currency as some major economies had done.
- Another big story in 2010 was Eskom receiving approval for a $3,75billion (about R24,9billion) loan from the World Bank in April.
Later in the year, the power utility said it had identified all sources of funding its R440billion capacity expansion programme over seven years, beginning April 1 2010.
Eskom chief executive Brian Dames said the plan included R160billion from debt capital markets, R100billion from development finance institutions and export credit agencies and R40billion from government. The latter comprised R20billion remaining of the original R60billion government loan and a proposed additional equity injection of R20billion.
Eskom said a large volume of construction work on the building programme had already been completed.
Of the three power stations under construction, the first unit of the 4800-megawatt Medupi coal-fired power station is scheduled to come on line at the end of 2012, with the Ingula pumped storage scheme following at the beginning of 2014, and the first unit of the 4800-megawatt Kusile power station by the end of 2014.
Strength of rand will set 2011 agenda
THE strength of the rand will remain a talking point in 2011 whether it is strong or weak, an economist said yesterday.
Efficient Group economist Dawie Roodt said if the rand remained strong, inflation would remain low and so would the interest rates.
"This may seem good but it is bad for economic growth (because it has a negative impact on our exports)," he said.
Roodt said if the rand became weak in 2011 it would increase inflation and interest rates but would be "good for our exports".
He said another big issue to watch in 2011 was the European economies. He foresaw another debt crisis in Europe.
"What happens in Europe is important to South Africa because Europe is our biggest trading partner," Roodt said.
Looking back at 2010, the South African economy enjoyed a steady recovery from recession, but the main highlight of the year was the rate cuts that consumers enjoyed the entire year.
Reserve Bank governor Gill Marcus cut interest rates for the whole year to help the economy recover and ease the burden on debt- trapped consumers.
In each monetary policy committee announcement the repo rate was cut by 50 basis points, taking the interest rates to the lowest levels since 1974, and inflation fell comfortably within the targeted 3 to 6percent range.
"The economy is growing. This is the step to support the growth and ensure the recovery continues," Marcus said, qualifying the cut in September.
In the last interest rate cut in November the Reserve Bank cut the repo rate by 50 basis points to 5,5percent, which took the prime rate to 9percent.
The repo rate is the rate at which the Reserve Bank lends to commercial banks, while the prime rate is the rate at which the banks themselves lend to their prime clients.
Though Cosatu welcomed the cuts throughout the year, it still insisted that the Reserve Bank should not just focus on inflation targeting but also on job creation.
Economists attributed the interest rate cuts to a strong rand, which gave room for the monetary policy committee to cut interest rates while at the same time boosting the recovery of the economy from the global economic crisis.
While the strength of the rand had its positives, some quarters of the country called on the government to do something about its surge.
Finance Minister Pravin Gordhan said: "In addition to concerns about the global recovery ... there's an additional factor ... the rapid movement of huge capital flows around the world, which has an impact particularly on the currencies of developing countries like South Africa."
Gordhan said measures to handle capital inflows had to be found locally.
"We need to find tools in the domestic environment that ideally do not have a negative impact on other countries," he said.
At the time the rand had gained 28percent since the start of 2009 and was trading 0,57percent lower at R6,86 against the US dollar.
Both Gordhan and Marcus claimed that it was not the right time for South Africa to fix its currency as some major economies had done.
Later in the year, the power utility said it had identified all sources of funding its R440billion capacity expansion programme over seven years, beginning April 1 2010.
Eskom chief executive Brian Dames said the plan included R160billion from debt capital markets, R100billion from development finance institutions and export credit agencies and R40billion from government. The latter comprised R20billion remaining of the original R60billion government loan and a proposed additional equity injection of R20billion.
Eskom said a large volume of construction work on the building programme had already been completed.
Of the three power stations under construction, the first unit of the 4800-megawatt Medupi coal-fired power station is scheduled to come on line at the end of 2012, with the Ingula pumped storage scheme following at the beginning of 2014, and the first unit of the 4800-megawatt Kusile power station by the end of 2014.
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