Although the depreciation of the exchange rate does create challenges for monetary policy because of the adverse impact on inflation, a floating exchange rate acts as a shock absorber and is an important part of the adjustment process in dealing with a deteriorating current account deficit.
Nevertheless the underlying structural issues remain, which will make it all the more important for South Africa to improve its domestic savings performance, as well as to continue to attract sufficient volumes of foreign capital, preferably in the form of direct investment, an area where German companies have been particularly strong. But the importance of Germany goes beyond simply looking at our economic ties.