SASOL has joined Reserve Bank governor Gill Marcus in calling for a stronger rand‚ even though a weaker exchange rate would boost the profit of the world’s largest maker of fuel from coal.
While Sasol gains about R860m in operating profit for every 10c the rand weakens against the dollar on average per year‚ it is not in favour of a policy to let the rand devalue‚ the firm said.
The rand fell to a four-year low against the dollar on Wednesday. The depreciation was "overdone”‚ Ms Marcus said last week.
"It erodes the long-term competitiveness of the country‚” Sasol executive for global chemicals Andre de Ruyter said on Monday. "We are far more on the same page as the Bank governor’s to say ‘let’s keep a stable currency‚ a predictable currency’.”
The Manufacturing Circle‚ an organisation of 40 large companies employing 200‚000 people‚ wants to see the rand trading between R8.50 and R9.50 to the dollar‚ executive director Coenraad Bezuidenhout said on Tuesday. That would allow local manufacturers to "stand a chance” of competing with companies in countries such as Malaysia‚ Indonesia‚ Brazil and Vietnam.
Poynting Holdings‚ a Johannesburg maker of antennas‚ receives most of the proceeds of its defence-related sales‚ which make up 43% of its revenue‚ in foreign currency‚ and prefers a stable rate of about R8/$‚ founder and CEO Andre Fourie said.
"I agree with Sasol that the stability of the rand is more important than targeting a specific level‚” Mr Fourie said. "When we started this company‚ the dollar was at R11 to R12. We were so competitive it was almost laughable because we had an artificially weak currency.”
Vivienne Taberer‚ who helps manage about $14bn in emerging-market debt and currencies at Investec Asset Management‚ said: "If you look at the Mexican peso and you look at what happened to their competitiveness‚ a weaker currency has benefited their economy structurally.
"To have a rand that is hugely undervalued and then go back to vastly overvalued is in no one’s interest. If you have a currency that is relatively stable‚ people will have certainty‚ ” she said.
The rand’s value is the biggest external factor affecting Sasol’s profit‚ chief financial officer Christine Ramon said at an investor presentation on Monday.
Sasol’s profit declined 13% to R12.1bn in the six months through to December as it wrote down the value of its Iranian polymers unit and recorded a R1bn foreign-currency loss as Iran’s rial weakened against the dollar‚ it said on Monday.
The rand may appreciate to R8.65/$ by year-end‚ according to the median estimate of 29 analysts. Ms Taberer said South African manufacturers would benefit from a weak rand only if it maintained that level.