International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn says that South Africa's inflation targeting policy may have led to a stronger rand. He warned against an attempt to devalue the currency. Strauss-Kahn says that the government has implemented the right policies to mitigate the impact of the global economic crisis. He was speaking during a lecture at Johannesburg's Wits University.

The rand strengthened 28% against the dollar last year, the second-best performer of 16 major currencies tracked by Bloomberg. That's undermined export industries, raising concerns from Finance Minister Pravin Gordhan and trade unions about job losses and lower exports.

Strauss-Kahn says that trying to resolve the real problems of the economy just by devaluing the currency is a very short-sighted view. He says the fact that South Africa has chosen to have an inflation target policy may have consequences of a rather strong rand.He said any policy measures that led to a weakening of the rand would scare off the foreign investors and capital that are needed to fund the country's current account deficit.

Strauss-Kahn also said policymakers in Africa's biggest economy should introduce more competition into the economy, especially into a banking sector dominated by four major players. "Creating more competition would certainly have a good impact on inflation," he said. "Efforts have to be made to create a more effective economy," he added. – Additional reporting by Reuters