AllAfrica's Charlayne Hunter-Gault meets up with IMF managing director Dominique Strauss-Kahn in Johannesburg. (Photo Courtesy IMF/Stephen Jaffe)

Johannesburg — LACK of competition was a much bigger challenge for SA's economy than the level of the rand, the MD of the International Monetary Fund (IMF), Dominique Strauss-Kahn, said yesterday.

He criticised the dominance of the country's banking, telecoms and food sectors by a few big companies, saying this was "not in the interests" of the economy.

"For many historical reasons, competition is not as vivid and as active as we would expect," he told reporters at the end of a two-day visit to SA.

"The way to help exports has more to do with competition in the economy rather than the value of the currency."

Improved competition would also create more jobs and curb inflation, raising the living standards of the poor, he said.

Trade unions and some senior members of the African National Congress have been lobbying for changes to the official policy of allowing markets to determine the exchange rate of the rand.

The unit was at R7,39/ late yesterday, a level Strauss-Kahn said was probably at the "strong end" of a manageable range.

Sustained rand strength has fanned fear about the competitiveness of local exports, which are leading SA out of recession.

Strauss-Kahn's remarks coincided with a statement yesterday by Finance Minister Pravin Gordhan, who said a report would be released "in the next month or two" on the outcome of an investigation into the spread between the Reserve Bank's repurchase rate and prime lending rates set by commercial banks.

The difference has been kept consistent between the four main banks and steady at 3,5 percentage points for the past few years. Before he retired last year, the Bank's former governor, Tito Mboweni, initiated an inquiry into the practice, saying a bit of "competition" was needed.

Otherwise, Strauss-Kahn applauded SA's economic policies, saying its response to the global financial crisis was "appropriate and timely". A fiscal stimulus of about R800bn and lowering interest rates by five percentage points had helped to protect the country from the fallout of the global downturn, he said.

Strauss-Kahn also said inflation targeting - another controversial topic for trade unions - was appropriate for an economy such as SA's. "It's a policy which has to be taken with some flexibility," he said, echoing comments by Gordhan in the national budget last month.

The Bank has repeatedly said it takes account of a range of other factors, including growth and employment, when setting interest rates. But its official mandate is to keep inflation inside a 3%-6% target range.

Strauss-Kahn said SA now had global responsibilities, after becoming a member of the Group of 20 (G-20) developed and developing economies.

"What is new is the role SA can play in global governance," he said. SA provided a voice for both the continent and other developing countries, which was taken into account by governments in the G-20.

Strauss-Kahn also pointed out that African countries were recovering from the global crisis at the same pace as the rest of the world, mainly because they had followed the right policies beforehand. "In our view of this crisis, Africa is back," he said.

But Zimbabwe needed to "build a track record" before the IMF would consider lending to it again. Its problems were not just economic, they were political and the IMF had concerns about governance at its central bank. Nonetheless, it restored Zimbabwe's voting rights last month, he said. They were withdrawn in 2003 after the country's failure to repay money it owed.

Strauss-Kahn visited Kenya before arriving in SA this week, and travelled to Zambia later yesterday.