* "Active monetary policy interventions" to weaken rand
* Government insists plan not in conflict with G20 pledge
* Rand up nearly 30 percent vs dollar since start of 2009
* Analysts doubt authorities can easily control currency
* Finance minister to discuss growth plan on Wednesday
(Adds analysis of central bank's position, graphic)
By Wendell Roelf and Stella Mapenzauswa
CAPE TOWN, Oct 26 (Reuters) - South Africa said on Tuesday that it would weaken its rand currency to boost economic growth, threatening a deal to refrain from competitive devaluations reached by the Group of 20 major nations just three days ago.
The statement by South African presidency minister Collins
Chabane appeared to mark a policy shift by President Jacob
Zuma's government, which previously had resisted calls by labour
unions to stimulate exports by weakening the rand
Chabane, describing a new long-term growth plan for South Africa, said it "entails a careful balancing of more active monetary policy interventions to achieve growth...through a more competitive exchange rate and a lower cost of capital."
The plan sees unemployment falling to 15 percent from 25.3 percent currently over the next 10 years, implying the creation of 5 million jobs during that period, the government said.
At a meeting of G20 finance ministers and central bankers in South Korea last weekend, countries pledged to "refrain from competitive devaluations" of their currencies. As a G20 member, South Africa was party to the agreement. [ID:nTOE69M004]
A South African government spokesman insisted on Tuesday that there was no contradiction between his country's plan and the G20 pledge, which was designed to reduce the risk of a global trade war.
"We don't see our growth path in conflict with G20 pledges," Themba Maseko told Reuters.
But analysts said South Africa's plan could herald more aggressive use of both a weaker currency and low interest rates over coming years in an effort to tackle unemployment, which Zuma's government has identified as its biggest challenge. (for a graphic, click http://r.reuters.com/kat32q )
Tuesday's statement suggested "another change of the monetary policy committee's (MPC) mandate is on the way, plus more forex policy change", said Peter Attard Montalto, emerging markets economist at Nomura International in London.
"I think this is a push for more activist policy on both currency and MPC, involving new interventions and a shift of the MPC mandate to explicit growth targeting over time."
BUDGET REVIEW
Chabane did not elaborate on Tuesday on how South Africa would conduct its "monetary policy interventions", or say how much it wanted to weaken its currency.
"The minister of finance will make further pronouncements on the growth plan and possible currency foreign exchange plans on Wednesday," Maseko said.
Finance Minister Pravin Gordhan, who has himself spoken out in the past against efforts by countries to weaken their currencies, will deliver his medium-term budget review on Wednesday. [ID:nLDE69I0YK]
The rand has appreciated about 27 percent against the U.S. dollar since the start of 2009, buoyed by a flood of investor funds from sluggish developed economies into emerging markets.
Many analysts said the country would have difficulty fighting this trend. South Africa has relatively low foreign exchange reserves and relies on foreign capital inflows to plug its current account deficit, so it cannot easily copy countries such as China and Brazil, which have used forex interventions and taxes on capital flows to steer their currencies.
"South Africa is but a very small boat on a very rough sea in the currency war arena. It is beyond its capacity to steer the exchange rate of the rand directly," said Jac Laubscher, group economist at finance house Sanlam.
"Its only hope is to use its position in the G20 to promote a multilateral response to the need for currency realignment... Apart from that, any country that runs a perpetual current account deficit can hardly afford to discourage capital inflows."
CENTRAL BANK
Also, it is not clear if South Africa's central bank, which is independent of the government, would go along with any plan to weaken the rand. It might be reluctant to undertake any major campaign of currency intervention; in September it said it was accumulating foreign reserves but that the process was "costly".
Similarly, it might resist the idea of cutting interest rates to weaken the rand as its core mandate is to protect price stability. Gordhan wrote to Reserve Bank Governor Gill Marcus in February saying the MPC must also take into account economic growth and job creation in rate decisions, but it is unclear if the government would go as far as formally changing the mandate.
For those reasons, some analysts said the talk of currency depreciation might largely aim at satisfying the labour unions, rather than being a firm commitment to a much weaker rand.
The new plan "is much more focused on employment creation and domestic growth generation than necessarily the currency", said Leon Myburgh, sub-Saharan Africa specialist at Citi.
"It's a very broad intention and the rand is just a subset of that. It's being viewed as a tool to get to an end objective, which is ultimately employment growth. I wouldn't overstate the role of the rand within the broader statement."
The rand did not move significantly against the dollar in response to Chabane's statement on Tuesday, reflecting doubts about authorities' ability to weaken the currency any time soon.
"It's more long-term, decades type of stuff -- he has made long-term comments. The budget announcements will probably have much more direct effect on markets," said Ion de Vleeschauwer, chief dealer at Bidvest Bank. (Additional reporting by Gugulakhe Lourie, Ed Cropley and Xola Potelwa; Editing by Marius Bosch and Andrew Torchia) (stella.mapenzauswa@thomsonreuters.com; +27 11 775 3161; Reuters Messaging: stella.mapenzauswa.thomsonreuters.com@reuters.net)) (For more Africa cover visit: http://af.reuters.com -- To comment on this story email: SouthAfrica.Newsroom@reuters.com)