Johannesburg — ANY move to devalue the rand would drive up food inflation and hit SA's poor the hardest, Pick n Pay chairman Gareth Ackerman warned yesterday.

The comments from the chairman of the country's second-largest supermarket chain came a day after official figures, showing a loss of 53 000 jobs in manufacturing in the second quarter, gave ammunition to trade unions and manufacturers that have called for a weaker rand to boost exports.

"SA is a net importer of food, and food commodity products are dollar-denominated. A wide range of foodstuffs - including bread, rice, coffee, tea and other staples - are all based on the dollar," he said. "Any attempt to devalue the rand will inevitably cause food inflation to rise rapidly again, hurting the poorest in our country, who are already under significant pressure from declining disposable incomes, rising costs and the threat of unemployment."

Poor people spend much more of their income on food relative to wealthier ones. While food accounts for just 9,2% of household spending for the richest fifth of the population, for the poorest fifth it makes up 37,5%, official figures show. For pensioners - measured separately to the five income bands - food accounts for 18,4% of spending.

The effect of rand-led inflation will spread wider than food.

"One of the less obvious examples is electricity prices, where a weaker rand will make Eskom's capital goods imports more expensive (except for the bit for which they have taken out currency hedges), which will eventually push up electricity tariffs," said Elna Moolman, SA economist at brokers Renaissance BJM.

It was questionable whether any government would be able to lower the value of its currency far enough and for long enough to increase the level of imports, Dr Moolman said.

"We just do not have enough foreign exchange reserves. It is also a very costly exercise."

Assuming it were possible to lower the rand - which has already weakened from R5,67 to the dollar in January 2005 to R7,33 yesterday - there would be other risks.

"Whatever gains may be achieved through devaluation will prove short-lived, as wage demands increase to compensate for the increased costs from the weaker currency," Mr Ackerman said. "This cycle of spiralling wages and prices will eventually erode whatever advantages may flow from a depreciated rand."

Dr Moolman agreed: "Nominal rand depreciation does not help your competitiveness if it boosts inflation. In SA, the risk of a wage-price spiral is very high."