Government must act on SARB warning bell
THE South African Reserve Bank raised warning bells last week regarding the threat of secondary or indirect sanctions that could be imposed as a result of our recent foreign policy decisions. A sudden halt to capital inflows and increased outflows could threaten the stability of our financial system if our ability to make international payments in dollars becomes impeded as a result.
This announcement followed the recent delivery of National Treasury’s Budget Vote for 2023/24, which also drew attention to a number of factors affecting the continued – and sustainable – growth of the South African economy. Minister Godongwana touched on inflation, the persistence and severity of load shedding, as well as the downside to our fiscal outlook, yet ignored a number of critical factors which require our urgent attention.
Of particular concern, and closely related to the SARB’s outlook, is South Africa’s greylisting with the Financial Action Task Force (FATF). While Godongwana has allocated over R265 million in (additional) funding to the Financial Intelligence Centre, to assist them in their effort to implement the FATF’s recommendations, this will do little to address the continued reputational and economic impact of myopic foreign policy decisions. Claiming victory over the fact that we have frozen assets of entities linked to Isis, the Taliban and al-Qaeda does not inspire much confidence – especially when we continue to cosy up to other violent regimes.
Bear in mind that we have already fallen out of favour with many offshore investors, with foreigners holding 25% of local government bonds, down from as much as 42% in 2018. The rand also hit a record low last week, after weakening as far as R19.86 to the dollar. Shortly afterwards, SARB issued another statement detailing its plans to prepare for a grid collapse.
If we want to continue growing the economy, with increasing levels of foreign direct investment, capital and revenue, while maintaining the value of our (already) resilient financial infrastructure, we must prioritise plans to end our energy crisis, while taking a more disciplined approach to issues affecting our reputation in the global political and economic arena.
SIMRYN ANDHEE | Quantitative Investment Analyst, Ion Capital, Cape Town