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Marcus: Strong Rand hurts SA's fragile economy

By Staff Writer
South African central bank Governor Gill Marcus said on Wednesday that because the country is in a state of fragile recovery and the rand being strong is hurting the continent's largest economy.

Since the start of 2009, the Rand has firmed by more than 28 percent, and this has weighed exports from mining and manufacturing sectors that are key contributors to the economy.

"We've seen the (manufacturing and retail) numbers that have come out. They are not as good as they should be. We are in a fragile recovery," she told a meeting in Johannesburg.

There has been growth in the manufacturing sector output and retail sales slowed unexpectedly on a year-on-year basis in August which has raised the possibility of yet another interest rate cut.

The central bank reduced the repo rate by 600 basis points to 6.0 percent since December 2008, leaving lending rates at their lowest level in three decades.

"The rand had helped ease inflation and contributed to the bank's decision to lower interest rates by 100 basis points this year, but it could be difficult to influence its value on the market to help the manufacturing sector," Marcus added.

"The size of the South African market is huge. When you are looking at what you can do , you have got to recognise the size of the market," she concluded.

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