Fewer foreigners own local government bonds, rand falls to new low and Bank tells of plans if grid collapses
15 June 2023 - 04:00
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The South African Reserve Bank recently sounded warning bells about the threat of secondary or indirect sanctions that could be imposed as a result of the government’s foreign policy decisions.
This followed the delivery of the National Treasury’s budget vote for 2023/2024, which also drew attention to a number of factors affecting the growth of the economy. Finance minister Enoch Godongwana touched on inflation, the persistence and severity of load-shedding and the downside to our fiscal outlook. Yet he ignored a number of critical factors that require urgent attention.
Of particular concern, and closely related to the Bank’s outlook, is South Africa’s greylisting by the Financial Action Task Force (FATF). While Godongwana has allocated more than R265m in (additional) funding to the Financial Intelligence Centre to aid its efforts to implement the FATF recommendations, this will do little to address the impact of myopic foreign policy decisions. Claiming victory over the fact that we’ve frozen assets of entities linked to Islamic State, the Taliban and al-Qaeda doesn’t inspire much confidence — especially when we continue to cosy up to other violent regimes.
We have already fallen out of favour with many offshore investors; foreigners now hold 25% of local government bonds, down from as much as 42% in 2018. The rand also hit a record low against the dollar recently. Shortly afterwards, the Bank issued a statement detailing its plans in case of a national power grid collapse.
If we want to grow the economy, with increasing levels of foreign direct investment, capital and revenue, while maintaining the value of our resilient financial infrastructure, we must prioritise plans to end the energy crisis, while taking a more disciplined approach when it comes to our reputation in the global political and economic arenas.
Simryn Andhee Quantitative investment analyst, Ion Capital
The FM welcomes concise letters from readers. They can be sent tofmmail@fm.co.za
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: South Africa must face financial reality
Fewer foreigners own local government bonds, rand falls to new low and Bank tells of plans if grid collapses
The South African Reserve Bank recently sounded warning bells about the threat of secondary or indirect sanctions that could be imposed as a result of the government’s foreign policy decisions.
This followed the delivery of the National Treasury’s budget vote for 2023/2024, which also drew attention to a number of factors affecting the growth of the economy. Finance minister Enoch Godongwana touched on inflation, the persistence and severity of load-shedding and the downside to our fiscal outlook. Yet he ignored a number of critical factors that require urgent attention.
Of particular concern, and closely related to the Bank’s outlook, is South Africa’s greylisting by the Financial Action Task Force (FATF). While Godongwana has allocated more than R265m in (additional) funding to the Financial Intelligence Centre to aid its efforts to implement the FATF recommendations, this will do little to address the impact of myopic foreign policy decisions. Claiming victory over the fact that we’ve frozen assets of entities linked to Islamic State, the Taliban and al-Qaeda doesn’t inspire much confidence — especially when we continue to cosy up to other violent regimes.
We have already fallen out of favour with many offshore investors; foreigners now hold 25% of local government bonds, down from as much as 42% in 2018. The rand also hit a record low against the dollar recently. Shortly afterwards, the Bank issued a statement detailing its plans in case of a national power grid collapse.
If we want to grow the economy, with increasing levels of foreign direct investment, capital and revenue, while maintaining the value of our resilient financial infrastructure, we must prioritise plans to end the energy crisis, while taking a more disciplined approach when it comes to our reputation in the global political and economic arenas.
Simryn Andhee
Quantitative investment analyst, Ion Capital
The FM welcomes concise letters from readers. They can be sent to fmmail@fm.co.za
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