can reduce the cost of capital Discussion of: Which policies can reduce the cost of capital in Southern Africa? OECD Development Centre Seminar: "Cheaper Money for Southern Africa - Unlocking Growth" 7 October 2004, Paris Torsten Sløk (OECD Economics Department, Paris)

Discussion of: Which policies can reduce the cost of capital in Southern Africa? This is very interesting and well-written paper which goes directly to the heart of the policy issues. Two reactions: 1) The relationship between inflation and the cost of capital. 2) To what extent are the costs of capital conditions facing South Africa different? Will look at: a) Government sector b) Corporate sector A lire tout simplement

Discussion of: Which policies can reduce the cost of capital in Southern Africa? Calculated the principal component of EMBI spreads in nine emerging markets. It explains 89% of the variation among the series. Uniqueness: Nigeria 0.073 Poland 0.049 Turkey 0.264 Argentina 0.392 Russia 0.058 Brazil 0.041 Egypt 0.042 Morocco 0.062 South Africa 0.062 1) Dans la définition, bien expliciter que the higher the volatility of the currency and the risk of depreciation expected by the market, the stronger the currency premium required by investors to held assets denominated in rand instead of assets denominated in dollars(every other risk dimension being equal 2) This currency premium is itself a component of the overall premium required by investors to hold South African assets issued for instance by the SA Treasury in Johannesburg instead of riskless assets such as US Treasury bills issued in New York in dollars. Therefore the currency premium on the rand is a major component of the South African rand denominated debt cost. There is therefore an obvious case for investigating its determinants.

Discussion of: Which policies can reduce the cost of capital in Southern Africa? 1) Dans la définition, bien expliciter que the higher the volatility of the currency and the risk of depreciation expected by the market, the stronger the currency premium required by investors to held assets denominated in rand instead of assets denominated in dollars(every other risk dimension being equal 2) This currency premium is itself a component of the overall premium required by investors to hold South African assets issued for instance by the SA Treasury in Johannesburg instead of riskless assets such as US Treasury bills issued in New York in dollars. Therefore the currency premium on the rand is a major component of the South African rand denominated debt cost. There is therefore an obvious case for investigating its determinants.