JOHANNESBURG, South Africa -- The South African rand faltered on the Johannesburg foreign exchange market Thursday and the central bank's inability to reverse the downturn led dealers to predict a nosedive to record lows.
The decline was attributed to South Africa's continuing political problems and a growing sentiment among foreign nations against investing in the country.
The rand, down 50 percent in less than a year, traded around 39 U.S. cents Thursday and closed at 39.50, after falling to a low of 38.25 U.S. cents during the day.
Dealers said it touched 40 cents when dollar export earnings came on the market, but faltered when it became apparent the Central Reserve Bank did not have dollars to maintain its buying support.
'The Reserve Bank obviously does not have the muscle to hold the rand above the crucial 40-cent level and it is bound to keep falling if there is no change,' one dealer said.
'If things keep going this way it could fall to 30 cents against the dollar within a few weeks,' he said.
Finance Minister Barend du Plessis closed the Johannesburg stock exchange to foreign transactions for three days last week and announced a package of measures to support the economy Sunday.
Dealers, however, said the exchange control restrictions and the four-month moratorium on the repayment of foreign debts could not prop the rand without significant central bank support.
South Africa's foreign debts total about $22 billion, but the country could have to repay up to $12 billion within a year if major foreign banks persist in their refusal to roll over short term loans, Reserve Bank Governor Gerhard de Kock said in New York Wednesday.
South Africa was forced to declare a four-month moratorium on its foreign debt payments because 'two or three' U.S. banks refused to roll over maturing credit lines, he said.
De Kock said his visit was concerned solely with financial matters and no political questions would be answered.
In his only reference to the reason for South Africa's problems, he said: 'If as a result of politics, we are forced in southern Africa, and I use the word 'southern' instead of 'South Africa,' to become capital exporting' rather than expanding industrial bases, 'it would be a great pity.'
Such a result 'would not help the cause of those who want to promote black advancement in South Africa,' he said.
Leaving for Europe, he said he hoped for a more sympathetic hearing than he received in the United States. He said South Africa would consider selling gold reserves to boost its meager $2 billion foreign currency reserves.
