The Rand Ratchets Down.(South Africa)(Brief Article)

The Hollywood action thriller "The Piano Player" was supposed to be filmed in southern Turkey. But after the terrorist attacks in New York and Washington, the film's insurer thought better of it--even though the Turkish lira is a bargain currency. One rewrite later, the film went into production last month in Cape Town instead. The city offers world-class production services, arresting beauty and modern infrastructure. But just as important, the once mighty rand is now right next to the lira: in the basement.

Down, down, down goes the rand, and with it South African spirits (even as a good bottle of Cabernet costs the equivalent of $5). The cheap rand helps South African fruit growers, fishermen, mine owners and filmmakers compete internationally. But ordinary folks feel the price of imported items rising out of reach. With each fresh low, analysts trot out a new list of villains: currency speculators, a strong U.S. dollar, recession in the "emerging markets." But even government officials, who've kept spending in check and courted foreign investment, are bewildered. "It's something that has happened. Quite why, I don't think we know," President Thabo Mbeki said last week. That afternoon the rand hit a new low.

Mbeki's critics call the rand's weakness a no-confidence vote. They cite his public skepticism over what causes AIDS. They attack his policy of "quiet diplomacy" toward the repressive regime of Robert Mugabe in neighboring Zimbabwe. They evoke suspicions that a government report last month whitewashed shady deals in a huge 1999 arms transaction; the falling rand has driven costs above $7 billion. "All the basics in the economics textbooks don't refer to unemployment, AIDS, Zimbabwe and the perception with the arms deal that the government is involved in... corruption," said Terry Crawford-Browne, the lead plaintiff in a suit to revoke the deal.

A cooler view is that a new economic freedom has backfired on the postapartheid government. Before the African National Congress took power in 1994, South Africa imposed the most rigorous exchange controls outside the Soviet bloc. No South African citizen could have a ...