UPDATE 2-S.Africa cbank will not be soft on inflation:Marcus

* Will take whatever measures to tackle CPI

* Rand gains not solely driven by capital inflows

* Investment needs to increase to sustain growth

* European debt problems a worry for growth

(Adds quotes, background)

SOWETO, March 29 (Reuters) – South Africa’s central bank
will not be soft on inflation, Reserve Bank Governor Gill
Marcus said on Tuesday, reiterating the bank was concerned
about the impact on inflation from food and oil prices.

The Reserve Bank kept its benchmark repo rate on hold at
5.5 percent last week as expected but raised its inflation and
growth forecasts, reinforcing expectations interest rates will
start to rise later this year. [ID:nLDE72M1JS]

On Tuesday Marcus said she expected inflation to pick up
somewhat.

“We will not be soft on inflation, whatever measures we
have to take we will take, but in a measured manner,” Marcus
told a group of small businesses in Johannesburg’s Soweto
township.

Marcus said it was a challenge identifying what measures
to take to tackle gains in the rand currency which she said
were not solely driven by capital inflows.

The rand (ZAR=D3: Quote, Profile, Research) gained about 12 percent against the
dollar last year despite the central bank spending just under
55 billion rand accumulating reserves.

The currency fell about 10 percent against the greenback in
the first two months of this year, but has since reversed most
of those losses. It last traded at 6.8675 on Tuesday, from
about 6.87 just before Marcus’s speech.

“There’s something else working here. We’ve seen outflows
this year but the rand is where it was before. Part of the rand
story is what is happening between the dollar and the euro,
it’s not so simple,” Marcus said.

She said the bank would continue to build reserves, but it
was not doing so to target a level for the rand.

The rand is currently trading around 6.86 against the
dollar and the bank has previously been active at levels around
7.00.

GROWTH

At its meeting last week, the central bank raised its
growth forecasts for South Africa to 3.7 and 3.9 percent in
2011 and 2012 respectively. Marcus said investment levels
needed to increase to sustain growth.

“In 2010, it declined by 3.7 percent and if you really want
to grow, it would need to be between 25 and 30 percent. We’ve
got a very long way to go in that regard.”

The government has said South Africa needed to grow by
about 7 percent a year to make a dent in unemployment, compared
to 2.8 percent in 2010. About half of the adult population is
jobless in Africa’ largest economy, leaving millions in poverty
16 years after the end of apartheid.

Another risk factor for South Africa was the European
sovereign debt crisis.

“If Europe is not growing what does it say about us? We’ve
got to develop new markets, we’ve got to be efficient.”

Europe is South Africa’ largest trading partner, with about
33 percent of local exports destined for that region.

(Reporting by Phumza Macanda; Editing by Andrew Hay)

UPDATE 2-S.Africa cbank will not be soft on inflation:Marcus