Exporters need inflation targeting

South Africa’s global competitiveness is being affected by inflation, which is at a “higher level than our trading partners,” finance minister Pravin Gordhan told parliament in his budget speech. In a comment which drew criticism from the labour movement, Gordhan said “a credible monetary policy framework that focuses on managing inflation is crucial to reducing long term borrowing costs and providing confidence about the future. “These are necessary to stimulate investment, employment and competitiveness – particularly among exporters and import-competing industries. “At present our level of inflation is higher than that of our trading partners, which lowers our competitiveness. “Low and stable inflation is also essential to protect the living standards of workers and the poor,” he said, adding that the Reserve Bank would “continue to pursue a target for CPI inflation of three to six per cent”. However, exporters cannot expect the rand to weaken in the near future, warned economists. “The budget was almost as rand friendly as it could be," said RMB's John Cairns. "The minister said that it had been agreed that SA needed a stable and competitive real exchange rate," Cairns said.