Finance experts suggest higher interest rates to ease weak rand

Economists say the local currency is battling because of a lack of adequate leadership.

Picture: EWN.

JOHANNESBURG - As the rand continues to plummet economists say the only option left to ease the problem is higher interest rates.

The rand broke through the 24 rand barrier to the pound, 16 rand to the dollar and 17 rand to the euro.

Economists say the local currency is battling because of a lack of adequate leadership.

On Wednesday President Jacob Zuma made the shock move to replace finance minister Nhlanhla Nene with little known Member of Parliament David van Rooyen.

The announcement sent the currency into a tailspin.

On Friday Cabinet will have a special sitting to discuss the bad economic climate.

Economists are concerned that the rand will continue to freefall if there is no direct intervention from the Reserve Bank.

Economist Lesiba Mothata said, "When you have a crisis, which this has become, bond vigilantes are beginning to test the resolve of the Reserve Bank because markets are self-regulating in a way."

Meanwhile, Democratic Allegiance leader Mmusi Maimane has described Zuma's explanation on Nene's axing as laughable and reckless.

In a statement yesterday the president said Nene will be moved to Shanghai as the country's nomination for the head of the African Regional Centre for the BRICS bank.

Maimane has described Zuma's reasoning as disingenuous.

"They are laughable and reckless at best. If Nene was indeed supposed to go to the Brics bank then the announcements should have coincided and more seriously we could not replace Nene with a back bencher that is unknown to markets."