Reserve Bank Governor Lesetja Kganyago. Picture: Gallo Images
The South African domestic financial system has weathered the turbulent global economic storms well over the past year and continues to remain resilient.
This was according to the South African Reserve Bank (Sarb) in its Financial Stability Review. The central bank expects this resilience to be carried into the new year and for some time.
Yet despite this, the bank said that concerns over global stagflation and the consequent tightening of financial conditions that were initially expressed in the May 2022 Financial Stability Review have actually materialised.
The bank fears that SA still remains vulnerable in the face of the ongoing Russia−Ukraine war that has contributed to higher levels of uncertainty and volatility than was previously forecasted.
Sarb said that South Africa is also facing slow and inequitable domestic economic growth and that is providing an unfavourable operating environment for the financial sector – the main contributor to this sluggish set-up also being the unrelenting energy woes faced by the country at large.
Load shedding, Sarb says, is not just negatively influencing the investor outlook towards South Africa but is also adversely affecting business productivity on a local front.
Government debt was another thorn in the side of South Africans. The review stated that while the Mid-term Budget Policy Statement told of a better-than-expected revenue collection, the country’s fattened fiscus still stares in the face of the Eskom debt monster and other defaulting SOEs.
During the period under review, the Sarb undertook the following initiatives and policy actions to enhance financial stability:
In terms of possible emerging risks to domestic financial stability, the fact that SA might be grey-listed ranked highly on this. In January 2023, the Financial Action Task Force’s designated Joint Group of the International Cooperation Review Group will discuss South Africa’s progress in addressing the deficiencies with the South African authorities.
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