Finance Minister Pravin Gordhan on Monday agreed with a panel of market experts that the stronger rand had protected the South African economy from rising inflationary pressures.

“The stronger rand, or less weak rand, however you would like to refer to it has helped contain oil and food prices in this inflationary environment,” Gordhan said at a Business Live breakfast in Johannesburg.

Calls to weaken the currency unit to increase South Africa’s competitiveness were raised in October, when the rand strengthened to a three-year high at R6,76 to the dollar.

This led to government implementing measures to moderate the impact of high capital inflows through loosening foreign exchange regulations, while a debate around increasingly interventionist measures to control the currency also started.

However, the somewhat stronger unit had buffered South Africans from the impact of the surging oil price, which rose to $117 a barrel on Monday, and rising food prices.

South Africa’s inflation was expected to remain in the 3% to 6% target band in 2011, but government had noted that higher oil and food prices were a lurking concern.

Gordhan said that government’s aim was to remove pressures in the real economy and to transform South Africa's economy through policy drives such as its New Growth Path, to allow the South African Reserve Bank to do “the right thing at the right time”.

The New Growth Path aims to create an additional five-million jobs in the next decade to tackle unemployment, with a large portion of State funds going towards this drive. This would contribute to South Africa’s deficit rising to R1,3-trillion by 2013/14.

Econometrix Treasury Management strategist George Glynos said that markets reaction to the 2011 Budget was not overly positive, because of concerns that South Africa was taking on higher debt at a time when the global economy was still volatile.

He added that markets were also troubled by a change in policy direction away from the “Manuel era” – referring to former Finance Minister Trevor Manuel.

However, Gordhan pointed out that South Africa had built up a surplus in previous years, when it showed real growth of up to 9%. This had been deflated during the economic crisis years to just over 2%.

“The markets have short memories, we let the deficit grow to protect South Africans against austerity measures being implemented in other parts of the world.”

Further, Gordhan noted that the debt levels being taken on by the State, which would be at around 40% of gross domestic product by 2014, would not be unmanageable, and significantly lower than debt levels that brought on problems in developed countries.

“Different times require different measures and we need to be flexible in that manner.”

Nedbank senior economist Isaac Matshego applauded government’s efforts to create additional employment, but questioned the efficiency of government spending. “It does not seem like the public sector really gets value for every rand spent.”

He also added that the State might be taking on too much of an interventionist role, rather than focusing on growing productivity levels, decreasing the cost of doing business and increasing flexibility to grow its private sector.

But, Gordhan said that while the State would focus on providing an enabling business environment, and increasingly focus on cutting unnecessary red tape, it was also the responsibility of the private sector to assist the State in achieving its medium-term objectives.

He added that a strong focus should be given to the modelling of successful public-private partnerships and the growth of small and medium-sized enterprises.

“Currently, the private sector runs 70% of the country’s business environment, which means that they also need to be responsible and not charge exorbitant prices for work. Remember, at the other side of every tender is a private partner.

“We as South African are all a family, and even though we may have differences in our views, we are still a family and we need to start operating as one,” the Minister added.

In coming weeks, President Jacob Zuma will meet with business and labour in an effort to strengthen cohesion between the different sectors.